SBP to keep policy rate unchanged at 11% as inflation pressures persist

The State Bank of Pakistan is expected to maintain its key interest rate at 11% for a fifth straight meeting scheduled on Monday (December 15), with analysts stating that inflation risks from food prices and external pressures.

According to an analyst at Arif Habib Limited (AHL), the central bank is likely to keep rates steady at the December meeting. This decision would aim to maintain stability while adopting a cautious stance, as the base effect that had kept headline inflation low is now fading.

The analyst added: “The slight widening of the current account deficit and the early stage of domestic economic recovery further support a prudent, wait-and-see approach from the central bank."

Meanwhile, some analysts believe that the SBP will not start easing monetary policy until the next fiscal year, beginning in July 2026.

Taurus Securities Limited Head of Research Mustafa mustansir stated: “Our base case assumes a reduction of 100 bps [basis points] in interest rates during FY27, while remaining unchanged for the remainder of FY26.”

Analysts said that the central bank’s inclination to maintain positive real interest rates would make policymakers cautious. 

Ismail Iqbal Securities Head of Research Saad Hanif said: “An unchanged rate also helps preserve positive real interest rates and aligns with IMF-backed policy discipline, especially amid still-fragile external buffers.

“With the bulk of easing already delivered earlier, the Monetary Policy Committee (MPC) is likely to wait for clearer, sustained disinflation before considering further cuts,” added Hanif.

On the external front, conditions are generally stable, but they require careful monitoring. Rising import demand and changing trade dynamics could create additional pressure ahead, the AHL report noted.