ISLAMABAD – Major drop in inflation during August opened door for potential interest rate cut of up to 150 basis points, as State Bank of Pakistan holds its Monetary Policy Committee this week.
Reports in local media quoting market surveys said a 150 basis point reduction is expected in the interest rate. Most of financial experts anticipate rate cut, with 15pc of those expecting a smaller reduction of 50 to 100 basis points.
As of September 2024, the interest rate hoevres at around 19.50pc after a total reduction of 250 basis points in recent policy decisions, which lowered the rate from 22pc to 19.50pc.
For fiscal year 2024-25, inflation is projected to stay between 10oc and 11pc, with interest rate expected to fall further to 14pc to 15pc by the end of FYs24-25. The survey also predicgted depreciation of Pakistani Rupee during this time.
The cut-off yield for T-bills moved down by 156 to 163 BPS compared to the last monetary policy. Inflation rates also plunged to single digits last month, and further decreases are anticipated this month.
Amid the positive development on economic front, stakeholders are looking at drop in a rate cut to stimulate the economy, As of now, interest rate remain at a historic high to effectively boost borrowing and economic growth.
Pakistan’s inflation rate drops to single-digit for first time in three years
