The State Bank of Pakistan’s Monetary Policy Committee decided on Monday to maintain the policy rate at 12%.

The Monetary Policy Committee (MPC) had convened in Karachi to make decisions on the country’s policy rate.

In the meeting, the committee assessed the overall financial and economic landscape, reviewed key economic indicators, analysed data from various sectors, and considered significant developments since the last policy announcement.

Experts predicted that the State Bank may lower the interest rate by as much as one per cent. The interest rate is at 12 per cent, while the pace of inflation has fallen to its lowest level in nearly a decade.

In its last meeting on January 27, the MPC adopted a cautious stance, reducing the interest rate by 100 basis points to 12 per cent in response to declining inflation and improving economic indicators.

The committee recognised positive changes in the current account balance, inflation rates, foreign capital inflows, financial management, and foreign exchange reserves.

It also highlighted the necessity for caution due to possible inflation increases and uncertainties in global economic policies.

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While taking into account developmental trends and potential risks, the MPC emphasised the need for a careful monetary policy approach to maintain price stability, crucial for sustainable economic growth.

The State Bank of Pakistan (SBP) said in a statement that the monetary policy committee had noted that despite a better-than-expected drop in the inflation rate last month, risks remained.

“Notwithstanding this decline, the Committee assessed the risks posed by the inherent volatility in these prices to the current declining trend in inflation,” the statement said.

“On the global front, uncertainty has increased significantly amidst the ongoing tariff escalations, which may have implications for global economic growth, trade and commodity prices,” the bank added.

“On balance, the MPC (monetary policy committee) assessed the current real interest rate to be adequately positive on forward-looking basis to sustain the ongoing macroeconomic stability,” the bank said in its statement.

Pakistan’s consumer inflation rate slowed to a near-decade low of 1.5% in February, largely due to a high year-ago base. That was below the government’s forecast and significantly lower than a multi-decade high of around 40% in May 2023.

“SBP’s decision to pause the easing cycle reflects its cautious stance amid persistent core inflation and renewed pressures from rising food and energy prices,” said Sana Tawfik, head of research at Arif Habib Ltd.

“While economic activity is gaining momentum, external account vulnerabilities, driven by increasing imports and weak financial inflows, warrant a prudent approach,” she added.

The central bank’s policy committee said on Monday it expected inflation to fall further before gradually inching up and stabilising within the SBP’s 5-7% target range.

The SBP kept its forecast of full-year GDP growth at 2.5% to 3.5% and said it expected economic activity to gain further momentum.

Pakistan’s economy grew by 0.92% in the first quarter of the fiscal year 2024-25, which ends in June.