Arif Habib Limited, a brokerage firm, suggests the central bank might consider a 1% decrease in interest rates at the next policy meeting on March 18. The market is split, with some expecting rates to stay the same due to ongoing IMF program talks, where a tight monetary policy is advised.
The firm believes the State Bank of Pakistan will base its decision on economic data, noting a likely fall in inflation rates to an average of 17% overall and 15% core, on a year-forward basis, which would mean positive real interest rates looking ahead. The SBP, in its last meeting, kept the rate at 22%, reflecting energy price volatility.
However, non-energy inflation is decreasing. The Monetary Policy Committee believes that, considering the projected inflation reduction, the real interest rate is positive when forecasting 12 months ahead.
Arif Habib Limited forecasts a decline in inflation, particularly in the second half of the fiscal year, with an average monthly rate of 1.2% in the latter half compared to 1.6% in the first. They predict an average annual inflation rate of around 25% for the year.
Factors such as global commodity price stabilization, a stable Pakistani rupee against the dollar, and a decrease in the current account deficit are driving these predictions. Additionally, a recent production increase in Large-Scale Manufacturing Industries (LSMI) suggests economic improvement.
Looking forward, interest rate cuts, agricultural support, demand increases, currency stability, and new government policies could boost LSMI production.
Internationally, the current account deficit has improved, with a 71% year-on-year reduction to $1.09 billion in the first seven months, and foreign reserves have increased, strengthening the rupee and helping control imported inflation. For the latest Real Estate News and Blogs, visit Realtorspk blogs.
