State Bank likely to maintain cautious stance on policy rate – Business

KARACHI: The upcoming State Bank monetary policy meeting on June 10 is garnering significant attention from stakeholders. The policy announcement will be made without factoring in budgetary measures or discussions with the IMF for another loan, leading to speculation about potential inflationary measures to provide relief to the public.

Despite a large gap between consumer inflation at 11.8% and the existing policy rate of 22%, experts believe the State Bank will adopt a cautious approach. A survey by Topline Securities revealed that 90% of participants anticipate a rate cut, with estimates ranging from 100 to 300 basis points.

The secondary market is already signaling a possible interest rate change, with both Kibor and government bond yields decreasing. The return on various government papers has also dropped over the past month.

Financial experts express uncertainty over budgetary measures, leading to speculation about the potential interest rate policy. The State Bank is expected to ease the monetary cycle gradually, with predictions ranging from a 200bps to 700bps decline in the policy rate by June 2025.

Market participants anticipate a rate cut and expect the policy rate to drop to 16% to 18% by December. The survey also indicates expectations of rupee depreciation and an IMF staff-level agreement by July.