By Ariba Shahid

KARACHI (Reuters) – Pakistan’s central bank is anticipated to lower its key interest rate by at least 1 percentage point on Monday, marking its sixth consecutive cut, as it seeks to revive economic and business sentiment amid declining inflation.

The central bank has reduced rates by 900 bps from an all-time high of 22% in June 2024, making it one of the most aggressive central banks in emerging markets, outpacing the 625 bps of rate cuts during the COVID-19 pandemic in 2020.

Fifteen analysts surveyed by Reuters predict the State Bank of Pakistan will cut rates by 100 bps. Only one analyst anticipates the bank will maintain the current rate of 13%.

Of the 14 analysts foreseeing a reduction, 11 expect a 100 bps decrease, one predicts 150 bps, and two forecast a 200 bps cut.

Ahmad Mobeen, a senior economist at S&P Global Market Intelligence, supports a 150 bps cut, influenced by low December inflation data and a stable exchange rate backed by a healthier current account.

As the South Asian country strives for economic recovery, it has received support from a $7 billion facility from the International Monetary Fund (IMF) in September.

Pakistan’s consumer inflation rate has eased to 4.1%, the lowest in over 6.5 years, attributed mainly to a high year-ago base, falling below the government’s estimates and significantly lower than a peak of around 40% in May 2023.

In December, the central bank projected that inflation would average “substantially below” its previous forecast range of 11.5% to 13.5% for this year. However, it may rise in May as the base year effect dissipates, cautioned Saad Hanif, a research analyst at Ismail Iqbal Securities.

Hanif, who projects a 100 bps cut, also noted inflation risks stemming from potential energy tariff hikes, new tax measures, and an increase in petroleum levies.

Analyst Expectations

Median Expectation: -100