Moaaz Manzoor

The State Bank of Pakistan (SBP) is widely expected to keep the policy rate unchanged at 11 percent in its upcoming Monetary Policy Committee (MPC) meeting on December 15, as analysts cite persistently firm inflation and stable secondary market yields as key factors limiting the space for an early rate cut.

Speaking with Wealth Pakistan, Syed Zafar Abbas, Manager at Zahid Latif Khan Securities, said there was little justification for easing at this stage. “There is no sign of a rate change. Inflation figures of 6–7 percent indicate that a rate cut may not be possible. Most likely, the policy rate will remain unchanged,” he said, adding that broader macroeconomic signals and stock market expectations also point toward a status-quo decision.

Muhammad Bilal Ejaz, Research Analyst at Ismail Iqbal Securities, shared a similar view. “Inflation is still hovering around 6–7 percent, and risks from food and energy prices persist. Secondary market yields remaining steady also suggest that market participants are not anticipating a rate cut,” he said.

Their assessment aligns with recent official data. The October monetary policy statement showed headline inflation rising to 5.6 percent in September from 3 percent in August, driven by food supply disruptions following summer floods, adjustments in administered prices, and an increase in core inflation to 7.3 percent.

The MPC had warned that inflation would likely remain above the 5–7 percent target band for “a few months” before gradually returning to the range in FY27, citing risks from global commodity prices, domestic agricultural supply constraints, and expected energy price revisions. The Ministry of Finance, in its latest economic update for November, also confirmed renewed price pressures, reporting inflation at 6.2 percent in October—up from 5.6 percent in September.

Notable increases were recorded in education (10.6%), health (9.7%), clothing and footwear (8.1%), and transport (6.7%). Month-on-month inflation rose by 1.8 percent, while prices are projected to remain in the 5–6 percent range in November due to mixed crop performance and lingering frictions in food markets. Despite inflationary pressures, growth indicators continue to show gradual improvement.

The SBP has revised its FY25 GDP growth estimate upward to 3 percent from 2.7 percent, supported by improved crop prospects, stronger industrial output, and steady services sector demand. Large-scale manufacturing expanded by 4.4 percent during July–August FY26, while July–September data showed a 4.1 percent increase led by automobiles, minerals, food, petroleum, and electrical equipment.

With inflation stabilizing at mid-single digits but showing an upward bias, and growth gaining modest momentum, analysts believe the central bank will stick to its cautious, data-dependent approach and keep the policy rate unchanged until clearer signs of sustained disinflation emerge in early 2026.

Credit: INP-WealthPk