KARACHI – All eyes are on State Bank of Pakistan (SBP) as Monetary Policy Committee (MPC) of central bank decide on the interest rate on Monday July 29 (Monday).
State Ban Governor Jameel Ahmad will announce a monetary policy decision, as market is expecting for a second consecutive interest rate cut.
A recent survey by Securities Broking and Investment Banking firms quoting high-net-worth individuals and financial institutions said there is strong anticipation for a significant rate reduction.
The survey shows that 47 percent of the market expects a 100 basis points cut, while one-third foresee a more aggressive 150 basis points reduction, lowering the current rate.
State Bank Policy Rate
Market sentiment shows a possible mismatch between anticipated rate cuts and subsequent drop in secondary market yields. This suggests that the market may have already factored in much of the expected rate reduction.
American Investment banking company JP Morgan also predicted that central bank would cut its key policy rate by around 5pc during fiscal year after $7 billion Extended Fund Facility (EFF) agreement between Islamabad and IMF.
JP Morgan expects that the EFF will boost foreign reserves, despite a slight increase in the current account deficit and exclusion from the offshore bond market. The new EFF is seen as a significant vote of confidence in Pakistan’s creditworthiness, supported by recent policy-based loans from the World Bank and ADB.
The improved external stability is likely to enable the central bank to ease monetary policy, with a potential rate cut of 500-600 basis points expected in the first half of FY2025.
