Brokerage Firms Expects No Change in Policy Rate in Upcoming MPC Meeting

The State Bank of Pakistan (SBP) is scheduled to announce its monetary policy on June 16, 2025, with brokerage house Topline Securities expecting a status quo. In a poll conducted by Topline Securities, 56 percent of the market participant expect a status quo in upcoming monetary policy meeting compared to 31 percent in last poll. While 44 percent are expecting a rate cut of at-least 50bps. Out of total 44 percent rate cut participants, 19 percent are expecting 50 bps cut, and 25 percent are expecting 100bps cut. Topline said the central bank has the further room of around 100bps cut and it expects FY26 inflation to avg. between 6-7 percent, translating into real rate of 400-500bps (Policy Rate: 11 percent), higher than historical real rate of 200-300bps. However, the brokerage house expects status quo in upcoming monetary policy based on following reasons. International crude oil prices have rebounded to $68-70/barrel amidst rising tensions in middle east region and expected US China deal. This warrants a cautious approach from policy makers, in our view, as oil prices movement has remained major driver of inflation in past. Some of the major notifications are also expected before start of next fiscal year i.e. gas price notification, and electricity price notification, among others. The inflationary impact of these measures is yet to assessed and absorbed, in our view. That said, we believe, Central Bank’s will observe status quo in upcoming meeting. Moreover, in the last MPC meeting of May 05, 2025, out of 9 members, 8 voted for 100bps cut. Amidst decline in policy rate by 100bps in last MPS, the yields of KIBOR and Tbills are lower by 88-99bps compared to last MPS. Currently 6M KIBOR and 6M Tbills is priced at 11.09 percent and 10.95 percent, respectively. Topline Research conducted a poll of key market participants on expectations over policy rate, and average inflation for FY26/Dec 2025. On question related to interest rate target for Dec 2025, 42 percent participant believe interest rate will remain in range of 8-10 percent vs. 37 percent earlier. While 58 percent believe interest rate will remain in over 10 percent by Dec 2025 vs. 63 percent earlier. Topline said it expects interest rate to fall to and bottom out at 10 percent by Dec 2025. On Inflation side, 69 percent of the respondents believe that inflation will remain in range of 6-8 percent, 20 percent are expecting between 8-10 percent, while 11 percent are expecting below 6 percent. The brokerage house expects Pakistan Inflation to average between 6-7 percent for FY26. Similarly, the government has set target of 7.5 percent for the same year and IMF expects 7.7 percent average inflation for FY26.