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SBP Keeps Rate at 10.5%, Cuts Banks’ Reserve Ratio

Policymakers signaled a two‑month pause, opting to ease liquidity via a one‑point cut to banks’ cash reserve requirement.

A logo of the State Bank of Pakistan (SBP) is pictured on a reception desk at the head office in Karachi, Pakistan July 16, 2019. REUTERS/Akhtar Soomro
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Overview

  • Markets had widely expected a 50–100 basis point reduction, with Topline Securities describing the decision as a surprise.
  • Governor Jameel Ahmed said the policy rate would remain unchanged for the next two months following the Monetary Policy Committee meeting in Karachi.
  • The MPC cited headline inflation at 5.6% year on year in December and sticky core inflation near 7.4% alongside faster domestic demand.
  • The SBP reduced the average cash reserve requirement for banks from 6% to 5% to support credit, as provisional Q1‑FY26 GDP growth registered 3.7% and the full‑year outlook was upgraded to 3.75–4.75%.
  • Foreign exchange reserves stood at $16.1 billion on January 16 with guidance to exceed $18 billion by June, while business groups including the LCCI and FPCCI criticized the hold and pressed for deeper cuts.