Pakistan's central bank held its key policy rate unchanged at 10.50% on Monday, the central bank chief said, defying market expectations for further easing following a surprise reduction in December. The decision follows a surprise 50-basis-point cut in December that ended a four-meeting pause, and comes after cumulative easing of 1,150 basis points since mid-2024. Interest rates had previously peaked at a record 22% in 2023.
The move, announced by central bank chief Jameel Ahmad at a press conference, ran counter to market expectations. A Reuters poll conducted ahead of the meeting had anticipated a 50-basis-point cut, citing easing inflation, stronger foreign exchange reserves and a stabilising rupee.
Pakistan's consumer price inflation slowed to 5.6% year-on-year in December, while prices fell on a monthly basis due to lower perishable food costs, official data showed. Non-food inflation, however, remained elevated in both urban and rural areas.
An International Monetary Fund staff report has cautioned against premature monetary easing under Pakistan’s $7 billion loan programme, urging policymakers to remain data-dependent to anchor inflation expectations and rebuild external buffers.
