KARACHI: The State Bank of Pakistan (SBP) is expected to announce a significant reduction in its policy rate during its upcoming monetary policy meeting on September 12. Analysts forecast a potential cut of 2 to 2.5 percentage points due to recent economic trends.
SBP Governor Jameel Ahmed will chair the Monetary Policy Committee meeting in Karachi, where the country’s current economic conditions will be assessed. This follows a noteworthy drop in the inflation rate, which has fallen to its lowest level in nearly three years.
The Consumer Price Index (CPI), a key inflation indicator, recorded a decrease to 9.6% in August from 11.1% in July.
The recent decline in inflation presents a favorable condition for the central bank to consider lowering interest rates. In the previous monetary policy meeting on July 29, the SBP had already reduced the policy rate by 100 basis points to 19.5%.
However, business representatives and stakeholders from the trade and industrial sectors argue that this rate remains excessively high and continues to stifle economic activity. They advocate for a further reduction to approximately 14%, asserting that the current rates are prohibitive for private sector borrowing.
The SBP’s potential rate cut comes at a time of a new $7 billion loan agreement with the International Monetary Fund (IMF), which includes stringent measures such as increased taxes on agricultural incomes and higher electricity prices. These measures have raised concerns among poorer and middle-class Pakistanis about the impact on their living standards.
