Pakistan’s Central Bank Expected to Reduce Policy Rate by 200 Basis Points

Islamabad: The State Bank of Pakistan (SBP) is anticipated to implement a significant reduction in its policy rate by 200 basis points in the upcoming Monetary Policy Committee (MPC) meeting. This move is driven by a combination of higher real interest rates, a disinflationary environment, and subdued economic activity within the country.

According to AKD Securities Limited, the decision for the rate cut comes as inflation is expected to decrease to 6.7% in October 2024, down from 6.9% in the previous month. This expected decline is attributed to deflation in food and transport prices. Additionally, high-frequency economic activity indicators have continued to reflect weak economic activity across the board, with most leading indicators except for Oil Marketing Company (OMC) sales showing a negative trend during September 2024.

The easing of monetary policy is also supported by an improving macroeconomic situation and the influence of the International Monetary Fund’s Extended Fund Facility, which is anticipated to increase the attractiveness of equities in the financial markets.

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