Citi predicts rapid rate cuts by Pakistan to 10.5% by mid-2025

Citigroup Global Markets anticipates that Pakistan's central bank will implement significant interest rate cuts in the upcoming months, predicting that the policy rate will drop to 10.5% by June.

This projection is based on expectations of further inflation reduction in January and a favorable review by the International Monetary Fund (IMF).

Citigroup analysts, led by Johanna Chua, head of emerging market economics, outlined their forecast in a report. They expect a 100-basis points cut in March, followed by an additional 50-basis points reduction in May, after a similar cut was made earlier this week.

"The central premise for the monetary policy committee's decision is a successful IMF review, which could pave the way for a $1 billion disbursement in 2025," the report noted.

Earlier this week, the State Bank of Pakistan reduced its key interest rate by 100 basis points to 12%, announced by Governor Jameel Ahmad in Karachi. Ahmad cited easing price pressures as the reason for the rate cuts.

This move by the central bank indicates growing confidence in controlling inflation, in line with Citigroup's positive outlook. The anticipated rate cuts are expected to boost economic activity and stimulate growth in the country.