The State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC) is scheduled to meet on June 10, 2024. The main agenda is to decide on the policy rate for the next two months. It is anticipated that the MPC will opt for a dovish rate cut of 100 basis points (bps), reducing the policy rate to 20%<\/strong>. This forecast is based on the recent month-on-month decrease in inflation.<\/p>\n\n\n\n The focus of the MPC may shift from solely controlling inflation to striking a balance between providing room for economic growth and managing inflation within the SBP’s target range.<\/p>\n\n\n\n In May 2024, inflation cooled down to 11.8%<\/strong>, resulting in an 11-month fiscal year 2024 (11MFY24) inflation rate of 24.9%<\/strong>. This brought the real interest rate to 10.2%<\/strong>, the highest maintained real interest rate since 1996, when it stood at 8.2%. With the pace of declining inflation, there is a possibility of reducing the real interest rate to achieve the target GDP growth in FY25.<\/p>\n\n\n\n For the next year, inflation is expected to be between 16%<\/strong> and 18%<\/strong>. This could lead to a more hawkish rate cut announcement by the SBP in FY25.<\/p>\n\n\n\n In the money and bond markets, the potential extent of the SBP’s rate cuts in June 2024 is already priced following the publication of April 2024 inflation data. Short-term 6-month to 12-month papers have fallen on average by 98 bps since April 2024, while yields on longer-tenure bonds have decreased by approximately 40 bps since the last auction.<\/p>\n\n\n\n Disclaimer:<\/strong><\/p>\n\n\n\n The information in this article is based on research by Research All efforts have been made to ensure the data represented in this article is as per the research report. This report should not be considered investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" It is anticipated that the MPC will opt for a dovish rate cut of 100 basis points (bps), reducing the policy rate to 20%. This forecast is based on the recent month-on-month decrease in inflation.<\/p>\n","protected":false},"author":8,"featured_media":3892,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[153],"tags":[261],"class_list":["post-5613","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy","tag-inflation-report"],"featured_image_src":{"landsacpe":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/04\/march-inflation-report-1140x445.jpg",1140,445,true],"list":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/04\/march-inflation-report-463x348.jpg",463,348,true],"medium":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/04\/march-inflation-report-300x188.jpg",300,188,true],"full":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/04\/march-inflation-report.jpg",1920,1200,false]},"_links":{"self":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts\/5613","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/comments?post=5613"}],"version-history":[{"count":0,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts\/5613\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/media\/3892"}],"wp:attachment":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/media?parent=5613"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/categories?post=5613"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/tags?post=5613"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Shift in MPC focus<\/h2>\n\n\n\n
CPI vs. Interest Rate<\/h3>\n\n\n\n
Month\/Year<\/th> Inflation Rate<\/th> Real Interest Rate<\/th><\/tr><\/thead> May 2024<\/td> 11.8%<\/td> 10.2%<\/td><\/tr> 11MFY24<\/td> 24.9%<\/td> –<\/td><\/tr><\/tbody><\/table> Inflation expectations for next year<\/h2>\n\n\n\n
Market reactions<\/h2>\n\n\n\n
Market Segment<\/th> Average Yield Change Since April 2024<\/th><\/tr><\/thead> Short-term (6M-12M)<\/td> -98 bps<\/td><\/tr> Long-term<\/td> -40 bps<\/td><\/tr><\/tbody><\/table>