 maintained its key policy rate at 10.5 percent Monday, a move that aligns with expectations and reflects conditions w...){kind=link}
The State Bank of Pakistan (SBP) maintained its key policy rate at 10.5 percent Monday, a move that aligns with expectations and reflects conditions where rising global energy prices and escalating regional tensions limit room for further cuts. The central bank’s statement on this matter is expected shortly.
Analysts had anticipated no change in the policy rate, citing Topline Securities’ alignment with these predictions. A Reuters poll conducted just prior to this announcement also supported a hold, as economic fallout from the US-Israel-Iran conflict has led to sharp global energy price spikes and geopolitical tensions that have tightened the central bank’s hands.
According to the SBP’s own statement, which followed January’s unchanged rate cut, it has already reduced the key rate by 1,150 basis points since mid-2024. This follows a dramatic drop from its peak at 22 percent in 2023 as inflation receded significantly.
Pakistan is currently grappling with the economic impacts of heightened tensions between the US and Israel against Iran. The closure of the Strait of Hormuz has caused global fuel prices to surge, creating substantial pressure on international markets. Brent crude futures are anticipated for a record one-day gain due to these geopolitical pressures, while gold prices have fallen by 2 percent.
Prime Minister Shehbaz Sharif is poised to introduce an austerity plan this week in response to the worsening global energy crisis. The government has already implemented significant price hikes, raising petrol and high-speed diesel prices by Rs55 per litre—the largest single increase ever recorded—following the start of the regional conflict’s first economic shocks.
As these events unfold, expect further developments from both the central bank and the government.