Pakistan’s Central Bank Anticipated to Lower Rates: Reuters Poll

By Ariba Shahid

KARACHI (Reuters) – Analysts anticipate that Pakistan’s central bank will make further cuts to its key interest rate during an upcoming policy meeting on Thursday, following a significant drop in inflation to single digits in August for the first time in nearly three years.

This potential reduction would follow two prior cuts of 150 basis points in June and 100 basis points in July, which lowered the interest rate from a historic high of 22% to its current level of 19.5%.

In a poll of 14 analysts, all expected another rate cut, with forecasts varying: two analysts predicted a 100 basis point reduction, ten forecasted a 150 basis point cut, and two anticipated a 200 basis point decrease.

The cut in July followed a staff-level agreement with the International Monetary Fund (IMF) and the launch of a new state budget that aimed for ambitious tax and revenue targets.

In August, bank chief Jameel Ahmed stated that recent interest rate cuts had achieved their intended outcomes. In his first interview since taking office in 2022, he noted that inflation was continuing to decline and that the current account remained stable, despite the interest rate reductions.

Pakistan’s annual consumer price inflation rate fell to 9.6% in August, marking the first single-digit figure in almost three years. Ahmed mentioned that the Monetary Policy Committee would review the latest developments, emphasizing that future rate decisions cannot be predicted in advance.

Ammar Habib, an economist who projected a 200 basis point cut, pointed out that real interest rates are currently at their highest level in three decades, at 10%. He remarked, "Risks to inflation are also low, given softening commodity prices and a fiscally responsible stance from the government at this time. Therefore, a 200 basis point cut seems reasonable without negatively impacting foreign exchange expectations too much."

Analyst Expectations:

1. AKD Securities -150
2. Al Habib Capital Markets -150
3. Ammar Habib -200
4. AWT Investments -150
5. Arif Habib Limited -150
6. EFG Hermes -150
7. Ismail Iqbal -100
8. JS Global Capital -150
9. KTrade -150
10. Lakson Investment -150
11. Pak Kuwait Investment Co -150
12. SCS Trade -200
13. Topline Security -150
14. Uzair Younus -100

Median Expectation: 150