SBP Monetary Policy Preview

As the State Bank of Pakistan (SBP) prepares for its Monetary Policy Committee (MPC) meeting on June 16, 2025, market analysts and participants are closely monitoring the economic landscape. Two key reports—Pearl Securities Limited’s June 2025 MPS Preview and Chase Securities’ market sentiment poll—provide critical insights into expectations, recommendations, and influencing factors for Pakistan’s monetary policy. Below is a comprehensive overview of the findings, offering a clear picture of the current economic sentiment.

Pearl Securities: a cautious pause amid uncertainties

Pearl Securities Limited anticipates that the SBP’s MPC will maintain the key policy rate at 11% during its June 16, 2025, meeting. This expectation is driven by a combination of global and domestic factors creating a challenging economic environment:

• Global Economic Policy Uncertainty: The Global Economic Policy Uncertainty Index surged by 249% year-on-year in April 2025, fueled by heightened trade tensions and uncertainty over tariff measures. This global backdrop is exerting external pressure on Pakistan’s economy.
• Geopolitical Risks: Persistent geopolitical uncertainties are contributing to a cautious approach, limiting the SBP’s room to adjust rates.
• Erosion of Base Year Effects: The diminishing impact of favorable base-year comparisons is adding pressure on domestic economic indicators, further supporting the case for a steady policy rate.

Pearl Securities emphasizes that these factors necessitate a prudent approach, with the MPC likely opting for stability over rate changes in this meeting.

Chase Securities: market sentiment poll

Chase Securities conducted a poll with 34 participants to gauge market expectations ahead of the SBP’s policy decision. The findings highlight a strong preference for stability, alongside concerns about exchange rates and commodity prices. Here’s a detailed breakdown:

Policy rate expectations

• 76% of participants expect no change in the policy rate, aligning with Pearl Securities’ view.
• 18% anticipate a 100 basis points (bps) decrease, 4% predict a 50 bps decrease, and 2% foresee a 25 bps decrease.

Recommended action for the MPC

• 68% recommend the SBP maintain the current rate, reflecting a cautious stance.
• 21% suggest a 50 bps cut, 9% advocate for a 100 bps cut, and 3% propose a 25 bps cut.

PKR/USD exchange rate outlook (next 1-3 months)

• 47% expect the Pakistani Rupee (PKR) to trade between 280-290/USD.
• 3% predict it could exceed 310/USD, and another 3% see it in the 300-310/USD range.
• Participants expressed concerns over exchange rate pressures in the near term, highlighting potential volatility.

Brent oil price expectations (next 6 months)

• 41% forecast Brent oil prices at $70-80/barrel.
• 24% predict $60-70/barrel, 21% expect $80-90/barrel, and the remainder see $90-100/barrel.

SBP’s pace of monetary easing

• 67% believe the SBP’s current pace of monetary easing is appropriate.
• 24% think it’s too fast, while 10% consider it too slow.

Factors influencing policy rate outlook

The poll identified several key drivers shaping market expectations:

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• Inflation Trends
• IMF Negotiations/Conditions
• Fiscal Policy
• Geopolitics
• Commodity Prices
• Global Interest Rate Environment
• PKR Exchange Rate Stability
• External Account Position
• Political Policy

These factors underscore the complex interplay of domestic and global dynamics influencing Pakistan’s monetary policy decisions.

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Key takeaways

Both Pearl Securities and Chase Securities reflect a consensus on the need for caution. The expectation of a steady policy rate at 11% is driven by global uncertainties, geopolitical risks, and domestic pressures such as exchange rate volatility. While the majority of market participants favor maintaining the status quo, a minority see room for modest rate cuts to stimulate growth. The PKR’s outlook remains a concern, with nearly half of respondents anticipating it to hover in the 280-290/USD range. Meanwhile, Brent oil price expectations suggest moderate stability in global commodity markets, which could influence Pakistan’s import bill and inflation trajectory.

The SBP’s measured approach to monetary easing is broadly supported, with 67% of poll participants approving its pace. However, external factors like IMF negotiations and global trade tensions will continue to shape the economic narrative in the coming months.

Looking ahead

As the MPC convenes on June 16, 2025, all eyes will be on how the SBP balances these pressures. Will it prioritize stability, as anticipated, or surprise markets with a rate adjustment? Stay tuned for updates on this critical decision that will shape Pakistan’s economic trajectory.

⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →