Why SBP kept interest rates unchanged

The State Bank of Pakistan's latest monetary policy decision reflects easing inflationary risks following the decline in international oil prices. The previous 100 bps rate hike was largely a pre-emptive move to anchor inflation expectations amid heightened geopolitical uncertainty. With the FY27 budget also signaling a tilt towards growth while maintaining fiscal discipline, the latest decision appears consistent with the evolving macroeconomic landscape. The policy stance should be viewed positively by the market, with bond yields likely to decline further as inflation expectations moderate, improving valuations for equities and supporting broader investor sentiment.