Pakistan central bank set to deliver fifth straight rate cut to revive economy
KARACHI, Dec 13 (Reuters) -Pakistan's central bank is likely to cut its key interest rate for a fifth consecutive time at its policy meeting on Monday, analysts said, as policymakers continue to nurse the fragile economic recovery amid a sharp slowdown in inflation.
The State Bank of Pakistan has chopped the benchmark policy rate to 15% from an all-time high of 22% in June, having last reduced it by a record 250 basis points (bps) in November.
Each of the 12 analysts surveyed by Reuters expects a 200 bps cut next week.
"The cuts since June 2024 have been timed with the inflation softening and will stimulate the economy through lower cost of borrowing for the business sector," said Ahmad Mobeen, senior economist at S&P Global Market Intelligence.
The South Asian country is navigating a challenging economic recovery path and has been buttressed by a $7 billion facility from the International Monetary Fund (IMF) in September.
The country's annual consumer inflation rate slowed to 4.9% in November, largely due to a high base a year earlier, coming in below the government's forecast and significantly lower than a multi-decade high of around 40% in May last year.
At its last meeting, the central bank estimated average inflation for the fiscal year ending June 2025 would be much lower than a forecast of 11.5%-13.5%, while GDP growth would be better than expected but within the 2.5%-3.5% targeted range.
Still, analysts said the recovery was only starting.
"Monetary policy decisions normally take 6 months to filter through the economy," said Mustafa Pasha, chief investment officer at Lakson Investments.
"Initial signs of a recovery are evident in high-frequency economic indicators such as auto/petroleum/cement sales. To sustain and build on that will require consistency in policy, a reduction in the government's role and cheaper electricity/gas for our industrial base."
Some analysts say inflation may pick up next year due to higher power prices and the potential impact of taxes on the retail, wholesale and farm sectors from January.
Mobeen of S&P Global Market Intelligence said the central bank needed to be mindful of external factors as well.
"The pace of easing needs to remain strategic as risks to inflation remain on the upside given the heightened geopolitical tensions, anticipated imposition of additional tariffs by the U.S. and counter-tariff policies from China."
# | Name/Organization | Expectation |
1 | AKD Securities | -200 |
2 | Al Habib Capital Markets | -200 |
3 | Arif Habib Limited | -200 |
4 | AWT Investments | -200 |
5 | FRIM Ventures | -200 |
6 | Intermarket Securities | -200 |
7 | Ismail Iqbal Securities | -200 |
8 | KTrade | -200 |
9 | Lakson Investments | -200 |
10 | Pak Kuwait Investment Company | -200 |
11 | S&P Global Market Intelligence | -200 |
12 | Topline Securities | -200 |
Median | -200 | |
Reporting by Ariba Shahid in Karachi; Editing by Savio D'Souza
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