A former state bank governor told Geo on the condition of anonymity considering the current economic situation of Pakistan, a 2% reduction in the policy rate would have been appropriate.

However, the former governor added that since negotiations with the IMF program are ongoing, they also desire that the interest rate should not be reduced significantly. Therefore, the most likely outcome is that the Monetary Policy Committee may decide to reduce the policy rate by only 1% as a signaling measure to the market.

Inflation has slowed down to 11.7% which could prompt a rate cut.

The Monetary Policy Committee of the State Bank of Pakistan, chaired by Governor Jameel Ahmed, decided to maintain the policy rate at 22% during its meeting on April 19.

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The committee is set to convene again on June 10, at which time it will make the necessary announcements regarding the key economic indicators of the country, including the policy rate decision.

Others, including S&P Global market intelligence have also predicted a rate cut.

Due to elevated inflation, heightened global financial market uncertainty, and the upcoming budget announcement in June, the SBP maintained its policy rate at 22% during its April 29 meeting.

Nevertheless, the recent softening in headline inflation increases the likelihood of the SBP lowering its policy rate in June 2024.