KARACHI – All eyes are on the State Bank November 4 Monetary Policy Committee (MPC) as interest rate is expected to cut further amid economic recovery.
The central bank is slated to convene on November 4 Monday, and policy rate is expected to slash by 200 basis points in its upcoming meeting in what is fourth cut since the start of new fiscal year amid a drop in inflation and a low current account deficit.
The upcoming interest rate reduction stemmed from a sharp decline in inflation, which comes down to the lowest in 3.5 years while substantial cuts are necessary to invigorate trade and industrial activity, with calls for the rate to be set around 10%, just above the current inflation level.
Ahead of the review, financial experts projected the cut to be around 200 basis points, which could bring the policy rate down to 15.5pc. Analysts from leading brokerage houses claimed that the significant drop in inflation will peddle the expected decision.
As most of the traders and industrliasts eye 200bps cut, some are speculating bigger reduction despite that more sharp cut could exert pressure on rupee and impact foreign investment, especially in other emerging markets.
By end of this fiscal year, the total interest rate reduction is expected to be around 650 basis points as policy rate could fall to around 13pc. It could be a sigh of relief for investors and industries burdened by high electricity costs.
