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2025-12-15 19:10:41
[Pakistan's Central Bank Surprisely Cuts Rates, Ignoring IMF Warnings, Unexpectedly Resuming Easing Cycle] ⑴ The Central Bank of Pakistan unexpectedly announced on Monday that it would cut its key policy rate by 50 basis points to 10.5%, breaking the previous four-time streak of keeping rates unchanged. ⑵ Previously, all 12 analysts surveyed expected the central bank to hold rates steady at 11%, making this rate cut a surprise to market expectations. ⑶ Following this cut, the cumulative rate reduction since peaking at 22% has reached 1150 basis points, with 1100 basis points of reduction occurring between June 2024 and May 2025. ⑷ Despite the International Monetary Fund's (IMF) warning last week against premature policy easing and its call for data-dependent approaches to stabilize expectations and rebuild external buffers, the central bank still decided to cut rates. (5) Data shows that Pakistan's inflation rate fell slightly to 6.1% in November, within the central bank's target range of 5%-7%. However, analysts expect that inflation may pick up again later in fiscal year 2026 as the base effect fades and food and transportation prices remain volatile.
