Pakistan Central Bank Plans 50bps Rate Cut Amid Easing Inflation

Pakistan's central bank, the State Bank of Pakistan (SBP), is expected to cut its benchmark interest rate by 50 basis points to 10.5%, following a unanimous consensus among analysts due to slowing inflation and improving external reserves. Consumer price inflation dropped to 3.2% in June, with the fiscal year average falling to a nine-year low of 4.49%, enabling the central bank to consider further monetary easing after significant reductions from a peak of 22% since June 2024. Despite positive real interest rates and improved reserves supported by IMF inflows under a $7 billion program, officials urge caution due to rising import demand and renewed currency pressures, including a crackdown on informal dollar trade to stabilize the exchange rate. SBP Governor Jameel Ahmad has emphasized maintaining a tight monetary stance to keep inflation within the 5-7% target while supporting external account stability. The recent upgrade of Pakistan's credit rating by S&P Global from 'CCC+' to 'B-' reflects improved fiscal management and stronger reserves, bolstering expectations for gradual rate cuts continuing into 2026. Overall, the central bank balances easing measures with geopolitical and economic risks to sustain economic recovery and inflation control.