Market expects no change in Pakistan’s interest rate at next MPC meeting

Pakistan is likely to keep the interest rate unchanged in the upcoming monetary policy to be announced on September 15, according to a poll conducted by Topline Securities.

The policy rate is currently 11 per cent after the State Bank of Pakistan (SBP) kept it unchanged following the meeting of the Monetary Policy Committee in July. The rate has been reduced from the record-high of 22% in June 2024 as Pakistan saw easing inflation and improved macroeconomic indicators.

The results reveal that 72% of the market participants expect the rate to remain unchanged compared to 37% in the last poll.

"We believe a higher ratio of status quo compared to previous polls is owing to recent floods, which may elevate food inflation and overall inflation in the coming months, amidst expected loss to crops and supply chain concerns", said Shankar Talreja, the head of research at Topline Securities.

He added that 28% of respondents said they expect a cut of 25bps and above, while 6% are expecting a 25bps cut, 13% are expecting a 50bps cut, and 9% are expecting a 100bps cut.

Talreja added the central bank is expected to “maintain status quo in upcoming meet owing to possible inflation risks emanating from recent floods and rising imports”.

However, he added the central bank has further room for around 50-100bps cut as the average inflation in FY26 is expected to be around 6-7%, translating into a real rate of 500-600bps (policy rate: 11%), higher than the historical real rate of 200-300bps.

"We maintain our interest rate target of 10% by Jun 2026, suggesting a cut of 100bps, possibly once flood-related issues are over, he said.

During the floods of 2010-2011, the area under cultivation of major crops — wheat, rice, and cotton — declined in the range of 3-18%, while rice production was also affected by around 30% in FY11 as per the economic survey.

6M KIBOR and 6 Months T-Bills are unchanged since the last MPC meeting

The secondary market yields and KIBOR are unchanged (down 2bps) from last MPC, suggesting the wider market expects status quo in the upcoming MPC meeting.

Policy rate

On a question related to the interest rate target for Dec 2025, 41% believe that the policy rate will remain unchanged till Dec, while 47% expect the rate to come down to 10%.

Inflation

On Inflation, 41% of the respondents believed it would remain above 7%. While 34% expected it to be in the range of 6-7% for FY26.

Exchange rate

On the currency side, 50% participants are expecting the PKR to be in the range of Rs285-290 against the USD by December, while 34% believe the currency will remain in the range of PKR 282-285.