KARACHI, December 03 2024: The upcoming meeting of the State Bank of Pakistan’s Monetary Policy Committee (MPC) is set for December 16, 2024. A recent survey conducted by Topline Securities reveals that a majority of participants, 71%, anticipate a rate cut of at least 200 basis points (bps). Among them, 63% expect a 200bps reduction, while 30% foresee a 250bps cut, and 7% predict a reduction exceeding 250bps.
A smaller group, 29%, expects a more modest rate cut ranging from 50 to 150bps, with 69% of this group anticipating a 150bps reduction. This expected cut is attributed to Pakistan’s high real interest rates of 1010bps in November 2024, significantly above the historical average of 200-300bps, despite the central bank’s previous cuts totaling 700bps since June 2024.
The fall in inflation, particularly in food prices and adjusted electricity tariffs, has contributed to the expectation of a rate cut. The monthly inflation rate in November 2024 fell to a 78-month low of 4.9%, prompting analysts to expect a reduction in the policy rate by 200bps, bringing the total cut to 900bps. Following this, real interest rates would remain high at 810bps, still above Pakistan’s typical range.
Regarding inflation for FY25, 59% of survey participants predict it will remain below 8%, driven by lower food prices and negative fuel cost adjustments. The overall inflation forecast for FY25 is between 7-8%, with expectations rising to 8.5%-9.5% for FY26.
Furthermore, 59% of participants foresee the policy rate reaching between 10-12% by June 2025, with 70% predicting it will stay below 12%, signaling confidence in inflation control and economic stabilization. The central bank is likely to maintain positive real interest rates in the range of 300-400bps to absorb external shocks and fiscal impacts, ensuring economic resilience.
