‌ The State Bank ⁣of Pakistan (SBP) is widely anticipated to​ maintain its key interest rate at 11% during ​its monetary policy committee meeting on ‍Monday, December 11, ‌2023, according to a Reuters poll. This decision comes as analysts revise their expectations for rate cuts, pushing them back to‌ late 2026, following warnings from the International monetary Fund (IMF) about persistent inflation risks.

⁤‍ November ⁤saw inflation ease to 6.1% from 6.2% in october, ⁤but it remains above the⁤ SBP’s target range of 5-7%. The ​IMF projects a ⁤temporary acceleration of inflation to⁢ 8-10% during the current fiscal year‌ before it stabilizes.
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Economic Stabilization and External Pressures

​ ⁣ While Pakistan’s macroeconomic ⁢situation has shown some signs of stabilization, analysts caution that ⁣the recovery remains vulnerable to ⁣external economic factors. Premature reductions ‌in interest ‍rates could put downward pressure on the Pakistani​ rupee, even with anticipated inflows from⁤ the IMF.
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‍ The IMF is ‌expected to disburse a $1.2 billion loan⁣ this week, intended to bolster Pakistan’s foreign exchange reserves and support climate-resilience⁢ initiatives.

Risks⁣ of Demand-Driven Inflation

⁢ ‌ ‍ Sana Tawfik,‍ head of research at Arif​ Habib Ltd, warned that‌ any⁣ increase in demand could negatively impact Pakistan’s external‌ financial position. “Any demand-driven uptick,” Tawfik stated, “will have an adverse impact on⁤ the external front.”

IMF‍ Warnings and Policy Tightness

The IMF has stressed the need for Pakistan to maintain an⁣ “appropriately tight” monetary⁢ policy to address lingering inflation risks. This ⁢guidance has substantially influenced analyst‌ expectations,leading to a postponement of anticipated rate cuts.