KARACHI: As per the market expectations, the State Bank of Pakistan (SBP) is likely to cut the key policy rate in its Monetary Policy Committee (MPC) meeting to be held on July 30, 2025.
In a poll conducted by Topline Securities, 56 percent of the market participants expect a 50-100bps cut in upcoming monetary policy meeting compared to 44 percent in last poll. While 37 percent are expecting no change compared to 56 percent in last MPS.
In last MPC meeting, majority was not sure about the rate cut as federal budget announcement was ahead and Iran Israel conflict was leading the surge in oil prices. In line with these concerns, state bank also maintained status quo and kept the rate unchanged at 11 percent.
In Topline view, the SBP has further room of around 100bps cut as FY26 inflation is expected to be average between 5-7 percent, translating into real rate of 400-600bps (Policy Rate: 11 percent), higher than historical real rate of 200-300bps.
Analysts believed, the left-over room is quite notional and will be gradual. “We expect central bank to announce cut of 50bps in upcoming MPC meeting,” they said.
FY26 inflation is expected to average 5-7 percent with July inflation expected in the vrange of 3-3.5 percent. The inflation is expected to remain in range of 3-5 percent till Jan 2026 and in range of 6-8 percent from Feb 2026 to Jun 2026.This suggests real rate of 400-600bps based on average FY26 inflation of 5-7 percent.
The secondary market yields have come down by 10-39bps on KIBOR and T-bills. The 6M KIBOR is currently at 10.99 percent while T-bill is at 10.75 percent.
On question related to interest rate target for Dec 2025, 51 percent believed that policy rate will come down to 10 percent by Dec 2025, while 32 percent believe it will be 9 percent by Dec 2025.
In line with market participants, Topline also expect interest rate falling to and bottom out at 10 percent by Dec 2025.
On currency side, 51 percent participants are expecting currency in range of Rs285-290 by Dec 2025 and while 15 percent each believes that exchange rate will remain in range of 290-295, 295-300, and over 300, respectively.
Meanwhile, in T-Bill auction held on Wednesday, participation of Rs1,058 billion was seen with government raising Rs409 billion against a target of Rs200 billion and maturity of Rs361 billion.
Yields decreased by 10-39bps, with the current yields standing at 10.85 percent for the 1-month T-Bill, 10.71 percent for the 3-month T-Bill, 10.71 percent for the 6-month T-Bill, and 10.70 percent for the 12-month T-Bill.
Copyright Business Recorder, 2025
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