KARACHI: Pakistan’s central bank is expected to cut its key interest rate further during its policy meeting on Thursday, analysts said, after inflation dropped to single digits in August for the first time in nearly three years.
That would follow two consecutive cuts — of 150 basis points in June and 100 bps in July — that have taken rates from an all-time high of 22 percent to their current standing of 19.5 percent.
All 14 analysts polled expected another cut, two of them of 100 bps, 10 of 150 bps, and another two of 200 bps.
July’s reduction came after a staff level agreement with the International Monetary Fund (IMF) and the introduction of a new state budget which set ambitiously high tax and revenue-raising targets for the government.
In August, central bank chief Jameel Ahmed told Reuters the recent interest rate cuts had had the “desired effect.”
In his first interview since assuming the role in 2022, he said inflation continued to slow and the current account remained under control, despite the cuts.
Pakistan’s annual consumer price inflation rate slowed to 9.6 percent in August, the first single-digit reading in almost three years.
Ahmed said the Monetary Policy Committee will review all these developments and that future rate decisions could not be pre-determined.
Ammar Habib, an economist who predicted a 200 bps cut in the poll, said real interest rates of 10 percent are at the highest level in the last three decades.
“Risks to inflation are also low given softening commodity prices and a fiscally prudent stance of the government for now. In view of this, it makes sense to do at least a 200-bps cut without hurting FX expectations too much,” Habib said.
