Interest rate cut hopes raised after inflation dip
The sharp decline in inflation during August has opened the door for a potential interest rate cut of up to 200 basis points, researchers and analysts said after Monday’s release of the latest inflation figures. The Consumer Price Index (CPI), which measures main inflation, dropped to 9.6pc in August from 11.1 per cent in July, creating an opportunity for the State Bank of Pakistan (SBP) to lower interest rates, in line with the demands of economic stakeholders. “I expect a 150 bps reduction in the upcoming monetary policy, as real interest rates currently stand at 9.9pc,” said Samiullah Tariq, head of the research and development at Pakistan Kuwait Investment Company (Pvt) Limited. During the previous monetary policy meeting held on July 29, the SBP reduced the interest rate by 100 bps to 19.5pc. However, many in the trade and industrial sectors expressed that this rate is still insufficient to stimulate the economy. These sectors are advocating for a reduction to around 14pc, citing the high interest rates as a major hindrance to private sector borrowing due to the prohibitive costs.