SBP likely to hold policy rate at 11% on June 16: Bloomberg

June 13, 2025 (MLN): The State Bank of Pakistan (SBP) is expected to maintain its policy rate at 11% on June 16, following a cumulative cut of 1,100 basis points over the past year, according to Bloomberg.

Analysts suggest the central bank will exercise caution, as a further reduction in borrowing costs could sharply increase demand for imports, putting pressure on foreign exchange reserves.

Imports have surged to $15 billion in 2025 the highest since 2022, a period marked by heightened default risk. In April alone, imports reached $5.2bn, exceeding the monthly average for the year.

Holding the rate steady would allow the SBP to evaluate the impact of its recent monetary easing.

Inflation rose sharply to 3.5% year-on-year in May, up from 0.3% in April, and is expected to average 8% in the first half of FY26 above the SBP's 6% target.

Meanwhile, economic activity reportedly increased for a second straight month in April, helping to ease immediate concerns about growth.

To note, the State Bank of Pakistan’s Monetary Policy Committee cut the policy rate by 100 bps to 11% effective May 6, 2025, contrary to market expectations.

The decision follows a sharp decline in inflation during March and April, driven by lower electricity tariffs and easing food prices.

Core inflation also fell in April due to favorable base effects and moderate demand.

The MPC noted an improved inflation outlook compared to its previous assessment.

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