In a surprise decision over the weekend, the State Bank of Pakistan (SBP) left its policy rate unchanged at 14.0%. The SBP was unequivocal in its criticism of government policies but is prepared to give the, politicians the benefit of the doubt in the hope that current all-party discussions bring the fiscal adjustment back on track. We hope this will be the case, but suspect that the necessary changes will either not happen or will not be effectively implemented. Accordingly, we judge it likely that the SBP will be forced to lift the discount rate again at either the end-March or end-May monetary review.