State Bank of Pakistan Governor Jameel Ahmed will announce the new monetary policy today during a press conference.
This follows a meeting of the Monetary Policy Committee at the State Bank’s Karachi headquarters, where they will review the country’s financial strategies and economic outlook.
Analysts are keenly anticipating a possible interest rate cut, which is projected to range between 1% and 1.5%. This reduction is expected to boost economic growth and alleviate financial pressures on businesses and consumers amid challenging economic conditions.
The MPC meeting will evaluate the current economic situation, inflation rates, and other critical economic indicators before finalizing its decision. Governor Jameel Ahmed will subsequently brief the media on the committee’s conclusions and the forthcoming adjustments to monetary policy.
On June 10, the MPC had previously reduced the policy rate by 150 basis points to 20.5%, effective from June 11. This decision followed a significant decline in inflation since February, with the May figures coming in better than anticipated. The MPC noted that underlying inflationary pressures were easing due to tight monetary policies and fiscal consolidation. Core inflation continued to moderate, and inflation expectations among consumers and businesses had also eased, as reflected in recent surveys.
However, the MPC acknowledged potential risks to near-term inflation due to upcoming budgetary measures and uncertainties regarding future energy price adjustments. Despite these risks, the Committee expected that previous monetary tightening would help control inflation.
Since the last meeting, the MPC observed several key developments: real GDP growth remained modest at 2.4% for FY24, with industry and services showing a subdued recovery, while agriculture experienced strong growth.
The current account deficit has narrowed, improving foreign exchange reserves to approximately $9 billion despite substantial debt repayments and weak official inflows. The government’s engagement with the IMF for an Extended Fund Facility program is expected to unlock additional financial inflows, further strengthening FX reserves.
Additionally, international oil prices have decreased, although non-oil commodity prices have slightly increased. Given these factors, the MPC has decided that now is an appropriate time to reduce the policy rate.
