Analysts Expect SBP Will Cut Interest Rate Soon

Karachi (A Correspondent): After a significant decline in the prices of petroleum products, stock market analysts are now expecting further decline in the interest rate.

Mohmmad Sohail, Head of Topline Securities said: “Pakistan government further reduced prices of Diesel and Petrol at the local pumps. In last two months Diesel price is down by 35 percent and Petrol 27 percent. This will bring down Pakistan’s inflation from 11 percent in FY20 to below 8 percent in FY21.”

Analyst Khurram Shahzad said, inflation is expected to lower but taxes from oil are to stay strong for the current fiscal year. “This will provide space for the government to take more relief measures.”

Stock market analysts believe inflation numbers in the month of May will be encouraging enough to lower discount rate, known as key interest rate, before the month of June. Analysts are expecting about 100 basis points to 150 basis points decrease in the discount rate. Interest rate, as some believes, is likely to be around 7.50 or 8 percent in June.

State Bank reduced interest rate by 4.5 per cent during March April and clipped it at 9 percent.

Pakistan is aggressively reducing interest rate to boost economic activity. Further cut in the interest rate will help business to inject more money in their business activities. Lower interest rate is always helpful in expanding the consumer market which is an important feature of any stimulus package.

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