Pakistan Interest Rate Cut: Analysts Predict 100bps Slash by December
Pakistan Interest Rate Cut
Pakistan’s central bank could slash its key interest rate by 100 basis points before December 2024, financial experts revealed Thursday. The move aims to lower business financing costs, stimulate productivity, and accelerate economic recovery.
All eyes are on the State Bank of Pakistan’s (SBP) Monetary Policy Committee meeting on July 30, where analysts widely anticipate the first Pakistan interest rate cut since June. According to Karachi’s Topline Securities:
- 56% of market participants forecast a 50-100bps rate cut next week
- 37% expect rates to hold at 11%
This consensus stems from tamed inflation (down to 3.2% in June) and falling global oil prices. The SBP paused rates last meeting citing budget uncertainty and Middle East tensions, but conditions now favor easing.
Why Rates Could Fall Further
- Inflation Outlook: FY26 inflation projected at 5-7% (Arif Habib Ltd: 5.4% avg)
- Real Interest Rates: Current 400bps real rate leaves room for cuts
- Growth Push: Supports PM Sharif’s 4.2% GDP target vs. last year’s 2.7%
“We expect a 50bps cut next week, bottoming at 10% by December 2025,” stated one analyst. Shahid Ali Habib (CEO, Arif Habib Ltd) agrees, noting: “A Pakistan interest rate cut now would lower financing costs after just 2.68% FY25 GDP growth.”
Economic Tailwinds
- IMF’s $7 billion loan stabilizing economy
- Current account surplus ($328M in June)
- Core inflation cooling to ~8% (FY26 forecast)
Market Impact: Limited but Symbolic
While the KSE-100 Index hit a record 140,585 last week (up 19% YTD), analysts say markets have priced in cuts. Treasury bills already trade at 10.7% – reflecting expected easing.
“Whether 50 or 100bps, the impact is marginal after last year’s 11,000bps reduction,” an analyst noted. Still, further cuts would ease business borrowing costs amid recovery efforts.
