KARACHI: The State Bank of Pakistan (SBP) is anticipated to further reduce its key policy rate by at least 200 basis points (bps) due to a slowdown in inflation and positive economic indicators, according to a survey conducted by a brokerage firm.

The survey, conducted by Topline Securities, revealed that 71% of respondents expect the central bank to announce a rate cut of no less than 200bps in its upcoming monetary policy review. Specifically, 63% of participants predict a 200bps cut, while 30% anticipate a reduction of 250bps, and 7% foresee a cut exceeding 250bps. The remaining 29% of respondents expect a smaller rate cut, ranging from 50 to 150bps, the report added. Earlier, in its last meeting, the SBP’s Monetary Policy Committee (MPC) had already reduced the key interest rate by a record 250bps, dropping it from 17.5% to 15%, marking its most aggressive reduction in history. This move was part of a broader easing cycle that began in June 2024, following four consecutive rounds of rate cuts. The MPC is scheduled to meet again on December 16, 2024. Topline Securities pointed out that expectations for a rate cut are driven by the high real interest rates in Pakistan, which stood at 1010bps in November 2024-well above the historical average of 200-300bps.

Despite a cumulative 700bps rate reduction since June, real rates remain high, reflecting the persistent inflationary pressures in the economy. The brokerage firm highlighted that inflation for November 2024 had fallen to a 78-month low of 4.9%, mainly due to a sharp decline in food prices and adjustments in electricity tariffs.