SBP to unveil revised policy rate soon

KARACHI: The State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC) is preparing for its last meeting of 2024, with many experts predicting another cut in interest rates, potentially by 200 bps.

In its previous meeting on November 4, the committee surprised many by cutting the policy rate by 250 bps, bringing it down to 15 per cent. This marked the fourth consecutive rate cut since June, as the SBP continued to ease monetary policy.

According to Business Recorder, many market analysts expect the SBP to stick with this approach as inflation has been slowing down.

A survey by Topline Securities showed that 71 per cent of respondents expect a cut of at least 200 bps. Of those, 63 per cent predict a 200-basis point cut, while 30 per cent believe the cut could go as high as 250 bps.

Similarly, a survey by Arif Habib Limited found that 73.5 per cent of participants expect a 200-basis point cut, with smaller percentages predicting either 150 or 250 bps.

Khurram Schehzad, the newly-appointed Advisor to the Finance Minister, also weighed in. He believes that the declining inflation rate should lead to further monetary easing.

According to him, a rate cut would lower borrowing costs for businesses and industries and help the government save on debt servicing, improving the fiscal balance in the months ahead.

During its last meeting, the MPC highlighted that inflation had dropped faster than expected, thanks to tight monetary policies.

They also pointed to lower food prices, stable global oil prices and no unexpected hikes in gas tariffs as factors helping bring inflation down.

Since the November meeting, there have been a few economic changes. The rupee has weakened slightly by 0.1 per cent, petrol prices have gone up by 1.5 per cent, and global oil prices have dropped a little. Inflation in Pakistan fell to 4.9 per cent in November, down from 7.2 per cent in October.

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