Central Bank Eyes Rate Cut on Inflation Drop
In the previous policy announcement, the central bank had fixed the policy rate at 19.5 percent.
The Monetary Policy Committee (MPC) of the central bank meets today to fix the policy rate for the next one and a half months.
Experts expect the committee to continue monetary easing between 150-200bps, on a lower inflation outlook and improved external account.
This would be the third consecutive cut, if MPC reduced the key policy rate as the committee had lowered the policy rate by 150bps on June 26, 2024, and 100bps on Jul 29 this year.
Larger rate cut expectations in upcoming monetary policy meetings are driven by single-digit inflation reading of Aug 2024 at 9.64 percent, analysts said.
Analysts expect the policy rate to come down to 14-15 percent in FY25.
Some key recent improvements in macroeconomic indicators support the expectation of a rate cut.
The main factor supporting the anticipated rate cut is the significant decline in inflation to single digits. Additionally, both headline and core inflation rates in Pakistan have decreased.
The business community demands a tangible cut in the interest rate between 300 to 500 basis points given the single-digit inflation.
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