Pakistan central bank is expected to reduce its key interest rate for the sixth consecutive time to boost economic activity and business sentiment. Analysts predict the rate could drop by 1 percentage point, continuing the bank’s efforts to control inflation.
| Heading | Details |
|---|---|
| Expected Rate Cut | 1 percentage point (100 basis points) |
| Total Cuts Since June 2024 | 900 basis points |
Previous Rate Cuts and Trends
Since June 2024, the central bank has reduced rates by 900 basis points from an all-time high of 22%. These cuts are among the most significant seen in emerging markets, aimed at stabilizing Pakistan’s economy.
| Heading | Details |
|---|---|
| Total Rate Cut Since June 2024 | 900 basis points |
| Highest Rate Before Cuts | 22% |
Analysts’ Predictions for Rate Cut
Most analysts predict a 100 basis points reduction in the upcoming policy meeting. Some expect even larger cuts, with forecasts of 150 or 200 basis points, although the median expectation is for 100 basis points.
| Heading | Details |
|---|---|
| Most Common Prediction | 100 basis points |
| Larger Cut Predictions | 150 or 200 basis points |
Why the Rate Cut is Expected
The expectation for further rate cuts is supported by a sharp slowdown in inflation. Pakistan’s consumer inflation rate dropped to a 6.5-year low of 4.1% in December 2024. This gives the central bank room to ease policy further.
| Heading | Details |
|---|---|
| December 2024 Inflation | 4.1%, lowest in 6.5 years |
| Inflation in May 2023 | 40% |
Inflation Risks in 2025
Although inflation has slowed, experts warn that it may pick up again in the coming months. The base year effect will wear off by May 2025, and factors like energy price increases and new taxes could push inflation higher.
| Heading | Details |
|---|---|
| Inflation Risk in May 2025 | Potential rise due to base effect |
| Additional Inflation Factors | Energy price hikes, new taxes |
IMF Support and Economic Recovery
Pakistan’s recovery is supported by a $7 billion loan facility from the International Monetary Fund (IMF). This financial backing helps stabilize the country’s economy, allowing the central bank to continue easing monetary policy.
| Heading | Details |
|---|---|
| IMF Support | $7 billion loan facility |
| Role in Economic Recovery | Helps stabilize economy |
What to Expect Next
The central bank is likely to continue easing rates to support economic recovery. However, inflation risks later in the year may influence future policy decisions.
| Heading | Details |
|---|---|
| Future Rate Cuts | Likely to continue easing |
| Inflation Outlook | Risks of rising inflation remain |
