SBP Interest Rate 2026 Likely Held at 11% as IMF Flags Inflation Risks

KARACHI, December 12, 2025: The State Bank of Pakistan (SBP) is expected to keep the policy rate at 11% in its upcoming meeting, according to a Reuters poll. Analysts have pushed back any forecasts for a rate cut to late 2026 after the IMF warned of persistent inflation risks and urged the central bank to maintain a “tight” monetary policy.

All 12 economists surveyed agreed that the SBP will hold the rate steady. Most expect inflation to hover between 6%–8% in the coming months, rising again toward the end of fiscal year 2026 due to base effects and volatile food and transport prices after recent flood-related disruptions.

IMF Warns Against Premature Easing

In its second review released on Thursday, the IMF emphasized that Pakistan’s monetary policy must remain appropriately tight. The Fund praised SBP for maintaining positive real interest rates, noting that this stance has helped reduce inflation and is critical for price stability and rebuilding foreign reserves.

Economists believe that the central bank will delay easing until the closing months of FY26 (ending June 2026). Some even project the first cut may occur in FY27, starting July 2026.

Inflation and External Pressures

After months of decline, inflation in Pakistan has begun to accelerate due to rising food and transport costs and fading base effects. Headline inflation eased slightly to 6.1% in November from 6.2% in October but remained above the SBP’s target range of 5–7%.

The IMF expects inflation could temporarily rise to 8%–10% this fiscal year before stabilizing. Analysts warn that premature rate cuts could pressure the rupee, even with expected IMF inflows, including the recent $1.2 billion disbursement for reserves and climate-resilience reforms.

Sana Tawfik, head of research at Arif Habib Ltd, said: “Any demand-driven uptick will have an adverse impact on the external front.”

SBP Policy Rate History

The SBP has held its policy rate at 11% since September 2025, following a steep 1,100 basis points cut between June 2024 and May 2025, when inflation fell sharply from near 40% in 2023.

Maintaining the current rate is seen as a precaution to support economic stability and safeguard Pakistan’s financial system from external shocks.