Pakistan’s central bank is expected to hold its key rate steady at a fourth straight policy meeting on Tuesday, with inflation forecast to start easing in coming months paving the way for rate cuts to boost the economy, analysts said.

The South Asian nation has embarked on a difficult path to economic recovery under a caretaker government after a $3 billion loan programme was approved by the International Monetary Fund (IMF) in July that helped avert a sovereign debt default, but contained conditions that complicated efforts to curb inflation.

Pakistan’s key rate was raised to an all-time high of 22% in June and has stayed unchanged for the last three rate meetings.

The median estimate in a Reuters poll of 12 analysts predicts no change on Tuesday, with one analyst calling for a 100 basis point cut. The market consensus is for rates to start easing gradually in the first half of next year, depending on the trajectory of inflation.

“Inflation is still too high and negative real interest rates do not justify any easing at this point. Our trading partners like the U.S. are already at positive real interest rates,” said Usman Zahid, director research at AKD Securities.

Zahid said the 2.7% month-on-month jump in November inflation was due to the increase in gas prices among other things but annual inflation is likely to start easing from February 2024.

Annual inflation clocked in at 29.2% in November, data from the Pakistan Bureau of Statistics (PBS) showed, a slight increase from October but well below a high of 38% in May.

Investors have already priced in a peak in Pakistan interest rates and the expected successful completion of the IMF programme has buoyed stock markets and the currency.

Pakistan’s benchmark index crossed a psychological barrier of 66,000 points to trade at a new all-time high, up 4,532 points or 7.3% in the week ending Dec. 8, the highest ever weekly return in terms of points.

“Stable currency, low current account deficit and likely fall in inflation in coming months may convince members of committee to adjust rates downwards,” said Mohammad Sohail, CEO of Topline Securities adding that he thinks the key rate could fall by 100 bps on Tuesday itself.