In a surprising decision of the Pakistan Monetary Policy. The State Bank of Pakistan (SBP) has announced on March 10, 2025, the key policy rate of 12%; it would last for an indefinite period, as it also ended the aggressive rate cutting cycle. This move comes despite inflation hitting a seven-year low of 1.5% in February. However, the birth of expectation or reality of a rate cut is still not that evident. The reasons the central bank gave for holding steady were economic uncertainties and external risks.

New Monetary Policy Pakistan: Why Did the SBP Pause Rate Cuts?

To support economic growth, the SBP had reduced interest rates by 1,000 basis points over the last six months and also secured a $7 billion IMF bailout which helped the economy a lot. The Monetary Policy Committee (MPC) chose to emphasize certain risks:

Persistent Price Risks: The prices of food and energy do not match with flexible inflation trends.

Global Economic Uncertainties: The growth in trade tariffs and the non-specificity of international market conditions will cause problems for Pakistan’s finances.

External Account Challenges: Pressures on the country’s reserves can be the result of slightly higher imports and much less financial inflows.

Economic Outlook & Future of Pakistan Monetary Policy

The SBP believes GDP growth will be between 2.5% and 3.5% this year but it is still concerned about inflationary pressures. Not even that though, future rate cuts probably will be the outcome that is linked with world peace or global stability and domestic economic trends. At this time, the balancing act between growth and financial stability remains the primary objective of the central bank.

A new monetary policy strategy has been in place since the first meetings of the IMF, which will help Pakistan recover from the economic crisis while also responding to the external risks.

Impact on Consumers and Borrowers

Loan repayments will remain expensive for home and car financing, especially as the interest rate has not changed, which will negatively affect consumers and loan-takers. Despite the decrease in the cost of living due to the drop in the inflation rate, the decision of the central bank not to cut further the interest rate of the savings account hints at a more conservative monetary policy pakistan stance. Nevertheless, some economists contend that the stability in the rupee and the controlled inflation may still end up in enhanced earnest money.

The cautious approach to the decision of the SBP to suspend its cut-tail rate cycle is a reflection of the careful measure of the monetary policy, which aims to support the economy, but at the same time to maintain price and financial stability. The central bank is keeping a close look on the viability of both the domestic and international environments, assuring that the growth of the economy in Pakistan will be secured, while uncertain global economic conditions succeed.