MPC meeting on 16th: Analysts give mixed views on key rate direction

KARACHI: The State Bank of Pakistan (SBP) is scheduled to hold its Monetary Policy Committee (MPC) meeting on Monday, June 16 to decide about the monetary policy.

Market sentiment remains divided ahead of the upcoming monetary policy meeting, with analysts expressing mixed views on the direction of interest rates.

The MPC initiated a measured easing cycle beginning in June 2024, cumulatively reducing the policy rate by 50 percent or 1100 basis points (bps) from 22 percent to 11 percent as of May 2025.

SBP reduces key interest rate by 100bps, takes it to 11%

According to a recent poll conducted by Topline Securities, 56 percent of market participants now anticipate a status quo compared to 31 percent in the previous survey, while 44 percent expect a rate cut of at least 50 basis points, reflecting growing uncertainty over the SBP’s next move. Out of total 44 percent rate cut participants, 19 percent are expecting 50bps cut, and 25 percent are expecting 100bps cut.

Analysts at Topline believed that SBP has the further room of around 100bps cut as average inflation is likely to between 6-7percent in FY26, translating into real rate of 400-500bps (Policy Rate: 11 percent), higher than historical real rate of 200-300bps.

However, Topline also expecting status quo in upcoming monetary policy based as international crude oil prices have rebounded to US$68-70/barrel amidst rising tensions in middle east region and expected US China deal. This warrants a cautious approach from policy makers, in our view, as oil prices movement has remained major driver of inflation in past.

In addition, some of the major notifications are also expected before start of next fiscal year, ie, gas price notification, and electricity price notification, among others. The inflationary impact of these measures is yet to assessed and absorbed, they added.

Copyright Business Recorder, 2025