Pakistan Likely to Cut Rates in Upcoming Monetary Policy
Karachi July 24 2024: Pakistan is likely to cut policy rate by another 100 to 150 basis points in the upcoming monetary policy to be announced at the end of this month as the inflation drops significantly in the last few months , according to the majority of the market participants.
The State Bank of Pakistan has released the advance calendar for the Monetary Policy Committee (MPC) meetings for the second half of 2024. According to the calendar, the committee will convene four times to review the country’s monetary policy. The next meeting is scheduled for Monday, July 29, 2024, when the committee will announce its decision.
A survey by Arif Habib Limited shows that 56 percent of analysts expect a rate cut in the upcoming monetary policy meeting. Another survey, conducted by JS Global Capital, indicates that 86 percent of analysts anticipate a rate cut.
In a survey conducted by CFA Society Pakistan 48.8% of respondents anticipate no change in the upcoming monetary policy rate, while 39.5% predict a decrease of up to 100 basis points, and 11.6% expect a decrease of up to 200 basis points. Moreover, 41.9% of participants expect the policy rate to be between 16-18% by the end of CY24, followed closely by 37.2% who foresee it being between 18-20%. A smaller proportion, 4.7%, predict the rate to be either below 14% or above 20%. Regarding the expectations for the policy rate at the end of FY25, 41.9% anticipating it to remain between 16-18%, 34.9% expecting it to be between 14-16%, and 16.3% predicting it to drop below 14%. Only 4.7% foresee a rate above 20%, and 2.3% expect it to be between 18-20%.
Overall, the CFA Society Pakistan survey reflects a significant inclination towards the policy rate remaining stable or experiencing a moderate decrease over the next fiscal period.
“We believe the SBP should err on the side of caution and hold rates this week” states Syavash Pahore economist at BMA Capital in its report. He cites the large rate cut in the preceding meeting, the finalization of the new EFF program, recent budgetary measures, and the impact of base rates in creating volatility in headline
inflation as the reasons for holding rates.
The country’s inflation rate has decreased from a peak of 38.0 percent in May 2023 to 12.6 percent in June 2024. Expectations suggest it will further decline to 10.5 percent in July 2024.
