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Insight: Anticipated Consistency for Pakistan’s Central Bank Rates Anticipated Consistency for Pakistan’s Central Bank Rates

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By Ariba Shahid

Steady as She Goes: Consensus Holds Firm at 22%

Pakistan’s central bank, amid looming inflation risks, is poised to maintain its key interest rate at a record 22% in its upcoming policy meeting. This stance, expectedly unaltered for the sixth consecutive session, reflects ongoing efforts to counter inflationary pressures.

Future Glimmer: Analysts Predict Cuts in Q2 2024

Many analysts foresee a shift in trajectory from the second quarter of the year, with a majority anticipating rate cuts in the April-June window. The median projection by a cohort of 17 analysts leans towards a status quo decision in the imminent meeting.

Inflationary Dance: Past, Present, and Future

Pakistan’s battle against inflation reached new heights in June with a key rate elevation, emblematic of the stringent conditions tied to an IMF bailout. February’s 23.1% year-on-year rise in the consumer price index, while a moderation since June 2022, paints a complex picture of financial resilience amidst challenging economic headwinds.

Forecasts and Features: Lights on the Economic Horizon

January saw the Central Bank adjust inflation forecasts for the fiscal year, highlighting the impact of escalating gas and electricity costs. With memories of the 38% inflation peak in May 2021 still fresh, economic stakeholders remain attuned to the fiscal tones set by regulatory bodies.

Insights and Optimism: A Glimpse into Sentiments

Expressing a cautious optimism, Finance Minister Muhammad Aurangzeb hinted at potential rate moderations in the course of the year. Mustafa Pasha, CIO at Lakson Investments, echoed this sentiment predicting gradual cuts in the later part of 2024 following an initial symbolic reduction.

Market Pulse: Analyst Projections and Sentiments

Among analysts, a blended mood emerges regarding prospective rate cuts. While some, such as AKD Securities and EFG Hermes, forecast an affirmative stance on rate cuts for Q2 2024, others like Capital Stake and KTrade remain conservative in their outlook.

Conclusion: A Blend of Factors and Future Projections

As Pakistan navigates its economic landscape amidst inflation challenges and IMF obligations, the coming months hold the key to potential rate adjustments. The Central Bank’s forthcoming decisions will not only impact near-term market sentiments but also shape the nation’s economic trajectory.

Bright Minds, Diverse Predictions: Analyst Poll Snapshot

1. AKD Securities: Yes – Rate Cut Expected

2. Ammar Habib Khan: No – Rate Cut Expected

3. Arif Habib Limited: Yes (-100 bps) – Rate Cut Expected

4. AWT Investments: Yes – Rate Cut Expected

5. Capital Stake: No – Rate Cut Expected

6. EFG Hermes: Yes – Rate Cut Expected

7. FRIM Ventures: Yes – Rate Cut Expected

8. Ismail Iqbal Securities: Yes – Rate Cut Expected

9. JS Capital: Yes (-100 bps) – Rate Cut Expected

10. KTrade: No – Rate Cut Expected

11. Lakson Investment: Yes – Rate Cut Expected

12. Pak Kuwait Investment Co.: Yes (-100 bps) – Rate Cut Expected

13. SCS Trade: Yes – Rate Cut Expected

14. Spectrum Securities: Yes – Rate Cut Expected

15. Topline Securities: Yes – Rate Cut Expected

16. Uzair Younus: Yes – Rate Cut Expected

17. Vector Securities: Yes (-25 bps) – Rate Cut Expected

Median Consensus: Yes – Rate Cut Expected

Reported by Ariba Shahid in Karachi; Edited by Swati Bhat and Mrigank Dhaniwala

(([email protected]; +92 3442834961;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.