KARACHI – State Bank of Pakistan is set to make the first cut in key interest rate, with all on the first monetary policy of the year which will be announced today on January 27th (Monday), with widespread expectations of further interest rate reduction.
The announcement will follow a meeting of the Monetary Policy Committee (MPC), chaired by the SBP Governor.
Recent survey revealed that SBP will lower rates by 100 bps to 12pc while some see the cut to 100-200 bps. S&P Global Market Intelligence officials reckon Pakistan’s central bank to cut rates by 150 bps, citing a significant drop in inflation and stable exchange rate.
The country’s economic recovery remains challenging, despite support from a $7 billion loan facility from the International Monetary Fund (IMF), granted in September. Consumer inflation fell to 4.1% in December, its lowest in over six years, primarily due to a high base effect from the previous year. This marks a dramatic improvement from the nearly 40% inflation rate in May 2023.
In December policy statement, the bank projected that inflation would remain “substantially below” its earlier forecast range of 11.5% to 13.5% for the year, while analysts warn that inflation may rise again in the coming months.
Today’s announcement is being watched closely for further indications of its monetary policy direction as Pakistan navigates its post-pandemic economic recovery
In last six months, the interest rates have dropped by 900 basis points, from a record high of 22pc to 13pc, making it one of the most aggressive rate cuts among emerging markets.
