Islamabad, Sep 8: It is largely expected that the state bank of Pakistan would lower its key policy rate for the third time in a row.
The cut, which is anticipated to be between 1% and 1.5%, comes after inflation dropped to single digits in August and is intended to boost the economy in the 2024–2025 fiscal year.
Given the considerable difference between the State Bank of Pakistan’s (SBP) current policy rate and the most recent inflation reading, which yields a real interest rate of 10–11%, there is a chance for a bigger drop.
Pakistan has historically kept its real interest rate average between three and five percent to guard against unanticipated spikes in inflation.
policy rate on Friday by 100 basis points, or one percentage point. The rate was already lowered by 250 basis points by the SBP during the months of June and July, from a record high of 22% to 19.5%.
Similarly, according to Shankar Talreja, Deputy Head of Research at Topline Securities, 59% of respondents anticipate a 150-basis point rate reduction from the SBP, 19% anticipate a 200-basis point drop, and 5% anticipate a reduction of more than 200 basis points.
In the meanwhile, 2% anticipate a 50-basis point drop and 13% a 100-basis point decline.
“We believe larger rate cut expectations in the upcoming monetary policy meeting are driven by August 2024’s single-digit inflation reading of 9.6%, which is expected to remain below 8% in September 2024,” Talreja said.
“We share the view that the SBP will announce a rate cut of 150 basis points, compared to the 100-basis point cut in the last monetary policy meeting in July.”
