The Monetary Policy Committee meeting is scheduled for today. After slashing the policy rate by half in just eleven months, the State Bank of Pakistan (SBP) has kept it unchanged at 11 percent in the last four reviews. Market consensus, reflected in surveys and secondary market yields, strongly favours maintaining the status quo.

However, some treasury heads at banks believe the SBP might deliver a surprise cut of 50-100 basis points. “If rates need to be cut in FY26, the only realistic window is December or January,” remarked one seasoned market player.

A 50-100 bps cut could serve as a face-saving measure and generate positive headlines. Beyond that, however, its impact on growth would likely be limited, while risks of dollarization and currency slippage would rise, potentially undermining the critical objective of building foreign exchange reserves to adequate levels.

That said, inflation is undeniably declining. It averaged 3.4 percent over the last 12 months, largely due to a favourable base effect, and is expected to remain contained even after the base effect neutralizes, with analysts forecasting 7-8 percent over the next 12 months. The latest reading stands at 6.1 percent. On a forward-looking basis, real interest........

© Business Recorder