Karachi: The State Bank of Pakistan (SBP) is expected to reduce its key policy rate by 50 basis points to 11.5% in its upcoming Monetary Policy Committee (MPC) meeting scheduled for May 5, 2025, according to a report released by brokerage house Arif Habib Limited (AHL) on Monday.
In its assessment, AHL cited a sustained disinflationary trend and a significant real interest rate cushion as grounds for a measured rate cut. “The marked decline in inflation stands as the primary catalyst behind our expectation of a policy rate cut,” the report noted.
Headline inflation dropped sharply to 0.7% year-on-year in March 2025 — the lowest in six decades — and is projected to decline further to a historic low of 0.45% in April. For the first 10 months of the fiscal year (10MFY25), average inflation is estimated at 4.88%, compared to 26.22% during the same period last year. The drop has largely been driven by a high base effect and softened food prices.
In its previous meeting held on March 10, the SBP had kept the policy rate unchanged at 12%, while highlighting the downside surprise in February inflation — largely attributed to declining food and energy prices. However, the central bank also warned of persistent core inflation and potential risks of volatility in commodity prices.
While AHL sees room for monetary easing to support economic activity, it also cautioned that the high base effect could wear off in the coming months, possibly exerting renewed upward pressure on inflation. The May 5 MPC meeting will be closely watched by investors, businesses, and policymakers alike for signals on the central bank’s future policy direction.
Samra Zulfiqar, a real estate analyst at Zameen.com, is passionate about finding projects that offer buyers the best returns. Her keen insights spotlight the market’s most promising opportunities.
