As the State Bank of Pakistan prepares for its Monetary Policy Committee (MPC) meeting on November 4, analysts are forecasting a potential interest rate reduction of at least 200 basis points.

This expectation is largely driven by easing inflationary pressures, with a recent poll from Topline Securities indicating that 85% of participants anticipate a minimum cut of 200 basis points.

The poll highlights that among these analysts, 63% expect a 200 basis point cut, while 30% foresee a reduction of 250 basis points. Only 8% predict a cut exceeding 250 basis points.

Analysts attribute the anticipated cuts to a significant drop in the inflation rate, which recorded 6.9% in September 2024 and is expected to remain between 6.5% and 7.0% in October.

If the State Bank implements the projected 200 basis point cut, it will mark the fourth consecutive reduction in this cycle, bringing the total cuts to 650 basis points.

After this adjustment, real interest rates would still be around +860 basis points, above Pakistan’s historical average of 200-300 basis points.

Furthermore, the survey indicates a shift in expectations regarding future interest rates. A notable 87% of participants now believe that rates will fall between 10% and 14% by June 2025, a significant change from previous forecasts that suggested rates would remain between 14% and 18%.

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Additionally, average inflation expectations have also decreased, with 81% now anticipating inflation to stay below 10%.

Overall, the upcoming MPC meeting is poised to be a pivotal moment for Pakistan’s monetary policy, as stakeholders closely monitor the State Bank’s decisions in response to the evolving economic landscape.