Pakistan Central Bank Holds Policy Rate at 12%, Signals Stability

Pakistan's central bank announced it would maintain the policy rate at 12%, surprising many analysts who anticipated further cuts. This decision halts a series of reductions that began in June 2024, where rates were lowered from a historical high of 22% to stimulate economic growth and comply with reforms linked to a $7 billion IMF agreement. The State Bank of Pakistan (SBP) cited the need for macroeconomic stability while noting that February inflation fell to a near-decade low of 1.5%, although core inflation remains elevated. Analysts predict inflation may rise in the coming months, with a median forecast expecting potential cuts to stop between 10.5% and 11%. The SBP's projections for GDP growth remain between 2.5% and 3.5%, reflecting cautious optimism amid external economic pressures. The decision reflects the complexity of balancing growth and inflation in a recovering economy.