Written by Aliba Shahid
KARACHI (Reuters) – Pakistan’s central bank is expected to further cut its key interest rate at a policy meeting on Monday, as policymakers seek to shore up the fragile economy as inflation eases from recent record highs. Continuing.
The central bank, the State Bank of Pakistan, has lowered its benchmark interest rate from a record high of 22% to 17.5% in three consecutive policy meetings since June, the last by 200 basis points in September.
All 15 investors and analysts polled by Reuters expect the central bank to cut interest rates next week. Two predict a 150bp cut, 12 expect a 200bp cut, and one predicts a 250bp cut.
Economic activity has stabilized since last summer, when the country came close to default ahead of an 11th-hour bailout from the International Monetary Fund (IMF).
The IMF in September boosted Pakistan’s struggling economy by approving a long-awaited $7 billion loan facility, with the South Asian country hoping to boost its economy with consistent policy implementation under the 2023-24 standby agreement. He said he had taken important steps to restore stability.
Although the economy is starting to gradually recover, with inflation falling sharply from a multi-decade high of nearly 40% in May 2023, analysts say further growth is needed to spur growth. He says interest rates need to be cut.
Mustafa Pasha, chief investment officer at Lacson Investments, said interest rates would need to fall below 15% and remain below that for six months to have a significant impact.
In its latest report in October, the IMF forecast Pakistan’s gross domestic product (GDP) growth rate of 3.2% for the fiscal year ending June 2025, up from 2.4% in 2024.
Inflation in October was 7.2%, slightly higher than the government’s forecast of 6-7%. The Treasury expects inflation to slow further to 5.5% to 6.5% in November.
But inflation is likely to rise again in 2025 due to the potential impact of higher electricity and gas prices under the new $7 billion IMF rescue package and taxes on the retail and wholesale sector proposed in the June budget. There is a possibility that it will accelerate.
Ahmad Mobeen, senior economist at S&P Global Market Intelligence, said that while lower interest rates would provide some relief to manufacturing, “higher electricity and gas prices and rising input costs due to global supply and gas supply will “The benefits may be limited.” Shipping restrictions apply. ”
The responses to the survey regarding Monday’s policy rate decision are as follows.
#. Organizational/individual expectations
1. AKD Securities -200
2. Arif Habib Limited -200
3. AWT Investment -250
4. EFG Hermes -200
5. Global stocks -200
6. FRIM Ventures -200
7. Ismail Iqbal Securities -200
8. JS Capital -150
9. K Trade -200
10. Lacson Investments -200
11. Pak Qatar Investment Company -200
12. S&P Global Market Intelligence -150
13. Spectrum Securities -200
14. Topline Securities -200
15 Uzair Yunus -200
Median -200
