Analysts expect 150 basis points cut in policy rate on September 12

ISLAMABAD: Analysts predict that the State Bank of Pakistan (SBP) will likely maintain its trend of easing monetary policy, with expectations of a third consecutive rate cut.

This forecast is driven by a slowdown in inflation and improved macroeconomic indicators.

The central bank is set to announce its key policy rate on Thursday, September 12. In its previous two meetings, the SBP reduced the rate by a total of 250 basis points.

Brokerage firm Arif Habib Limited (AHL) has projected a 150 basis point cut, which would lower the policy rate to 18 per cent—a level last seen in February 2023 when the rate was at 17 per cent.

AHL’s report cites a recent poll in which 93 per cent of respondents anticipated a rate cut, while 7 per cent expected no change

In July, the SBP’s Monetary Policy Committee (MPC) reduced the key policy rate by 100 basis points to 19.5 per cent. At that time, SBP Governor Jameel Ahmad noted a downward trend in inflation.

As of August 2024, Pakistan’s headline inflation had decreased to 9.6 per cent year-on-year, down from 11.1 per cent in July. This marks the first time in three years that the Consumer Price Index (CPI) has returned to single digits, according to the Pakistan Bureau of Statistics (PBS).

AHL highlighted that this decline has resulted in a real interest rate of approximately 1,000 basis points, providing further room for a rate cut.

Similarly, JS Global anticipates that the easing inflation will support the MPC’s decision to implement a third consecutive rate cut of 150 basis points, bringing the policy rate to 18 per cent.

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