According to sources, there is a strong likelihood that Pakistan’s central bank will keep the policy interest rate unchanged at 11% on Monday, as analysts are now pushing back expectations of any rate cuts to the end of 2026.
The International Monetary Fund (IMF) has warned that inflationary risks remain present and that it is essential to keep monetary policy sufficiently tight.
Sources said that all experts surveyed expect no change in the policy rate at the upcoming monetary policy meeting. Analysts believe that inflation is likely to remain between 6% and 8% in the coming months; however, once base effects fade by the end of fiscal year 2026, inflation could rise again. Meanwhile, flood-related disruptions to supply chains continue to cause volatility in food and transport prices.
According to sources, most analysts now believe that the State Bank of Pakistan will not begin monetary easing until the final months of fiscal year 2026, which ends in June 2026, while some have forecast the first rate cut in fiscal year 2027 (starting July 2026).
The report noted that the tight monetary stance has played a key role in reducing inflation, and maintaining it is necessary to ensure price stability and the rebuilding of external buffers. Experts said that these risks, along with the central bank’s preference for maintaining positive real interest rates, will keep policymakers cautious.
On the other hand, rising food and transportation costs and the fading of base effects have started to push inflation higher again. Inflation stood at 6.1% in November, slightly lower than 6.2% in October, but still above the State Bank’s target range of 5–7%.
According to the IMF, inflation could temporarily rise to between 8% and 10% during the current fiscal year, before stabilising later on. Although Pakistan’s overall economic conditions have shown some improvement, analysts caution that the recovery remains highly sensitive to external pressures.
Experts warned that any premature cut in interest rates could put pressure on the rupee, even if Pakistan receives the expected $1.2 billion IMF disbursement, which is intended to strengthen foreign exchange reserves and support climate-related