SBP likely to cut interest rate for the 6th consecutive month due to decreasing inflation
The State Bank of Pakistan (SBP) is expected to announce its sixth consecutive interest rate cut this month, as the country's inflation rate continues to decrease, providing an opportunity for policymakers to boost economic growth. The central bank's Monetary Policy Committee (MPC) will meet on January 10, 2025, to discuss the upcoming monetary policy, with market experts anticipating a 100 basis points rate cut, bringing the policy rate down to 12%.
The MPC meetings are scheduled to take place three times a year, with the first meeting typically held in January, April, July, and October. The schedule for the first half of 2025 has been unveiled, with the first meeting set for January 10, 2025, followed by meetings on April 11, July 11, and October 10. The last MPC meeting on December 16 reduced the policy rate to 13%, which was the fifth consecutive cut since June 2024, resulting in a total reduction of 900 basis points for 2024.
The decrease in inflation rate, which is projected to fall into the lower single digits in January, has provided room for the policymakers to boost weak economic growth. Analysts predict that the SBP's MPC might consider a more aggressive easing policy, with a possible reduction of 100 basis points at the upcoming policy meeting. The country is also taking measures to secure a $1 billion loan tranche from the International Monetary Fund, with the next review scheduled for this quarter.
The expected interest rate cut is likely to have a positive impact on the economy, as it will reduce the cost of borrowing and increase liquidity in the market. However, the SBP will need to balance its monetary policy decisions with the need to control inflation and maintain economic stability. The outcome of the MPC meeting will be closely watched by market participants and economists, as it will provide insight into the central bank's policy direction and its impact on the economy.
The State Bank of Pakistan is expected to cut its benchmark interest rate for the sixth consecutive time, with a possible 100 basis points reduction, bringing the policy rate down to 12%. The decision will be influenced by the decreasing inflation rate and the need to boost economic growth, as the country secures a $1 billion loan tranche from the International Monetary Fund.
