State Bank of Pakistan surprised the investors by holding the key rate at 10.5% as SBP prioritizes inflation control, IMF commitments, and economic stability despite market expectations for a rate cut.
BY keeping the key policy rate unchanged at 10.5%; It is signaling caution despite easing inflation and growing market pressure.
State Bank of Pakistan (SBP) Governor Jameel Ahmad announced the decision during a press conference in Karachi on Monday. Many analysts expected another rate cut. However, the SBP always give preference for stability over speed.
This move follows a surprise 50-basis-point cut in December 2025, which ended a four-meeting pause. Since mid-2024, the central bank has already minimized the rates by a massive 1,150 basis points. For context, interest rates had peaked at a record 22 percent back in the year 2023.
Why State Bank of Pakistan held the Policy Rate
The decision surprised financial markets. A Reuters poll had predicted another 50-basis-point cut. Analysts pointed to
- Falling inflation
- Improving foreign exchange reserves
- A more stable rupee
However, the SBP took a different view.
Governor Jameel Ahmad kept on stressing the need for caution. He highlighted lingering risks. While inflation has slowed, it has not disappeared.
Inflation Trends Offer Relief but Raise Concerns
Pakistan’s consumer price inflation eased to 5.6% year-on-year in December. Monthly prices showed a massive decline due to lower vegetable and food costs.
Challenges still exist!
Non-food inflation stayed high in both urban and rural areas. Housing, energy, and services continue to pressure household budgets. Because of this, the central bank is looking for no room for rushed easing.
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IMF Program Shapes State Bank of Pakistan‘s Decision
The International Monetary Fund (IMF) also played a key role. Under Pakistan’s $7 billion IMF loan program, IMF staff continued to offer suggestions against early monetary easing.
The IMF urged Pakistan to remain data-driven. IMF has a strong burning desire that the SBP needs to anchor inflation expectations and rebuild external buffers. The central bank appears aligned with this guidance.
What This Means for Pakistan’s Economy
By holding the key rate at 10.5%, Pakistan’s central bank signals stability. Borrowing costs remain high. However, the move reassures investors and lenders.
Looking ahead, analysts are of the view that gradual cuts are possible only if inflation continues to fall and economic indicators stay stable.
For now, caution rules monetary policy in Pakistan.