KARACHI: Pakistan’s central bank is expected to cut its key interest rate further at its policy meeting on Monday, with policymakers continuing their efforts to revive a fragile economy as inflation eases off recent record highs.
The central bank, the State Bank of Pakistan, has slashed the benchmark policy rate to 17.5% from an all time-high of 22% in three consecutive policy meetings since June, having last reduced it by 200 basis points in September.
All 15 investors and analysts surveyed by Reuters expect the central bank to cut rates next week. Two expect a 150 bps cut, twelve predict a 200 bps reduction, and one forecasts a 250 bps cut.
Economic activity has stabilized since last summer when the country came close to a default before an eleventh hour bailout by the International Monetary Fund (IMF).
The IMF, which in September gave a boost to Pakistan’s struggling economy by approving a long-awaited $7 billion facility, said that the South Asian nation had taken key steps to restore economic stability with consistent policy implementation under the 2023-24 standby arrangement.
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While the economy has started to gradually recover, and inflation has moved sharply down from a multi-decade high of nearly 40% in May 2023, analysts say further rate cuts are needed to bolster growth.
Mustafa Pasha, Chief Investment Officer at Lakson Investments, said rates must drop under 15% and hold below that for six months to have a material impact.
The IMF in its latest October report forecast Pakistan’s gross domestic product growth at 3.2% for the fiscal year ending June 2025, up from 2.4% in fiscal 2024.
The government expects annual inflation to have come in at 6-7% last month and slow further to 5.5-6.5% in November.
However, inflation could pick up again in 2025, driven by electricity and gas tariff hikes under the new $7 billion IMF bailout, and the potential impact of taxes on the retail and wholesale sector proposed in the June budget.
Ahmad Mobeen, senior economist at S&P Global Market Intelligence, said that while lower rates will offer some relief to the manufacturing sector, the benefits may be limited due to “elevated input costs, driven by high electricity and gas tariffs, combined with global supply and shipping constraints.”
The survey responses on Monday’s policy rate decision are listed below:

SINGAPORE: Oil prices extended gains on Friday, climbing more than $1 a barrel to pare weekly losses, as geopolitical tensions in the Middle East rose following reports that Iran was preparing a retaliatory strike on Israel from Iraq in the coming days.

Brent crude futures, which have rolled to the January contract, climbed $1.41, or 2 percent, to $74.22 a barrel by 7:56 a.m. Saudi time.

US West Texas Intermediate crude futures rose $1.46, or 2.1 percent, to $70.72 a barrel after settling up 0.95 percent in the previous session.

Israeli intelligence suggests Iran is preparing to attack Israel from Iraqi territory in the coming days, possibly before the US presidential election on Nov. 5, Axios reported on Thursday, citing two unidentified Israeli sources.

The attack is expected to be carried out from Iraq using a large number of drones and ballistic missiles, the Axios report added.

Oil prices were also supported by expectations that OPEC+ could delay December’s planned increase to oil production by a month or more, four sources close to the matter told Reuters on Wednesday, citing concern about soft oil demand and rising supply. A decision to delay the increase could come as early as next week, two of the sources said.

However, prices are set to fall more than 1 percent for the week, struggling to recover from a 6 percent loss on Monday after Israel’s strike against Iran’s military on Oct. 26 bypassed oil and nuclear facilities and did not disrupt energy supplies.

“Despite the crude oil market looking to lock in a third straight day of gains, it has been unable to completely erase the large gap lower that followed Monday’s re-open,” said IG market analyst Tony Sycamore based in Sydney.

However, WTI’s rebound should extend back toward where it closed last Friday at about $71.80, he added, as tensions in the Middle East returned to focus.

“After that, though, all bets are off. I think it will depend on who wins the US election and what fiscal stimulus details, if any, come from the NPC standing committee meeting,” Sycamore said, referring to major events in the US and China, world’s largest oil consumers, next week.

In China, manufacturing activity swung back to growth in October, a private-sector survey showed on Friday, echoing an official survey on Thursday that showed manufacturing activity expanded in October for the first time in six months. Both surveys suggest stimulus measures are having an effect.

US gasoline stockpiles fell unexpectedly last week to a two-year low on strengthened demand, the Energy Information Administration said on Wednesday, while crude inventories also posted a surprise drawdown as imports slipped.

The world’s largest oil producer pumped a monthly record high of 13.4 million barrels per day in August, EIA said.