The State Bank of Pakistan (SBP) is anticipated to maintain its key interest rate for the fourth consecutive policy meeting on Tuesday.
Analysts project a stable rate as inflation is predicted to decline in the coming months, potentially opening the door for future rate cuts to stimulate the economy. The current rate, elevated to a record 22% in June, has held steady in the past three meetings.
While one analyst suggests a 100 basis point cut, the median estimate from a Reuters poll of 12 analysts anticipates no change. Inflation, though still high, is expected to ease from February 2024, according to Usman Zahid, director of research at AKD Securities. Despite a 2.7% month-on-month increase in November inflation, the annual rate stood at 29.2%, showing signs of improvement from its May peak of 38%.
Investors have factored in a peak in interest rates, and optimism surrounding the successful completion of the IMF program has boosted stock markets and the currency. Pakistan’s benchmark index recently hit an all-time high, reflecting a 7.3% weekly return, the largest ever in terms of points, as stability in currency, a reduced current account deficit, and the potential decline in inflation create a positive economic outlook.
Mohammad Sohail, CEO of Topline Securities, suggests that these factors may lead the committee to consider a downward adjustment of rates, with a possible 100 basis point cut expected on Tuesday.
