The Monetary Policy Committee of the State Bank of Pakistan is scheduled to meet on July 29, 2024, to decide on the first monetary policy for FY2024-25, and there is huge expectation for a second consecutive rate cut.
A recent survey of high-net-worth individuals and financial institutions by JS Global reveals robust expectations for a substantial rate reduction. While 47 percent of the market consensus leans towards a 100 basis points cut, 31 percent of respondents anticipate a more aggressive 150 bps move from the current rate of 20.5 percent to 19 percent.
Investor sentiment suggests a potential disconnect between rate cuts and corresponding declines in secondary market yields post-MPS. This indicates that the market may have been proactive in pricing in a significant portion of the expected rate reduction, as evidenced by the historically wide yield curve between the 12-month yield at 18.3 percent and the discount rate at 21.5 percent.
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