SBP likely to cut interest rate in its new policy tomorrow

The State Bank of Pakistan (SBP) is set to announce its new monetary policy tomorrow, with expectations of a significant interest rate cut of up to two percentage points.

The Monetary Policy Committee (MPC) will meet under the chairmanship of SBP Governor Jameel Ahmad on December 16, before the official announcement. The committee will review key economic indicators before determining the policy rate.

Meanwhile, industrialists are urging the SBP to bring the policy rate down to a single-digit figure. Analysts predict a reduction of up to two percentage points in the benchmark interest rate.

A recent survey indicates that 71% of respondents anticipate a minimum two-percentage-point decrease in the policy rate, while 29% believe the reduction will be between 50 and 150 basis points. More specifically, 71-73% expect a 2% cut, 30% anticipate a 2.5% cut, and 7% foresee a cut exceeding 2.5%.

Since June 2024, the SBP has cumulatively reduced interest rates by seven percentage points over four consecutive meetings. Inflation in November fell to 4.9%, its lowest level in 78 months.