Faraz Saeed

LAHORE: Pakistan&rsquo;s central bank on Monday cut the benchmark policy rate by 50 basis points to 10.5%, marking a surprise shift after maintaining a status quo in the previous four monetary policy meetings. Pakistan Prime Minister Shehbaz Sharif welcomed the State Bank&rsquo;s decision, saying, &ldquo;By the grace and favor of Allah, the hard work of the government&#39;s economic team is bearing fruit,&rdquo; according to an official statement from his office. The prime minister added, &ldquo;Small and medium-sized businesses will benefit the most from the reduction in the interest rate and the availability of lower-cost loans.&rdquo; The decision by the State Bank of Pakistan (SBP) runs counter to market expectations. A Reuters poll of 12 analysts had projected no change, with most respondents expecting easing to be delayed to the later months of FY26 or beyond.&nbsp; The forecasts were revised after the International Monetary Fund (IMF) cautioned that inflation risks remain elevated and monetary policy should stay appropriately tight. This latest cut follows the SBP&rsquo;s last easing of 100 basis points announced after the May 5 meeting, which brought the policy rate down to 11%. With Monday&rsquo;s move, cumulative easing since rates peaked at 22% in April 2024 now stands at 1,150 basis points. In its post-meeting statement, the Monetary Policy Committee (MPC) said that headline inflation, on average, remained within the target range of 5-7% during July-November FY26. However, it noted that core inflation has remained relatively sticky, while headline inflation benefited from benign global commodity prices and anchored inflation expectations under a prudent monetary policy stance. Looking ahead, the MPC warned that inflation could rise above the target range toward the end of FY26 due to a low base effect from last year, before easing back into the target band in FY27. The committee said economic activity continues to gain traction, citing a robust improvement in key high-frequency indicators, including a higher-than-anticipated increase in large-scale manufacturing during the first quarter of FY26. &ldquo;In this backdrop, while ensuring ongoing price stability, the MPC noted the available space to reduce the policy rate to support sustainable economic growth,&rdquo; the statement said. At the same time, the MPC flagged persistent external challenges, particularly for exports, amid a fluid global environment marked by evolving tariff-related dynamics and tight financial conditions. The central bank highlighted several key developments since its last meeting. According to the Labour Force Survey 2024&ndash;25, the unemployment rate has increased compared to 2020&ndash;21, despite faster employment growth.&nbsp; Meanwhile, SBP&rsquo;s foreign exchange reserves continued to rise despite sizeable debt repayments, crossing $15.8 billion after the IMF disbursed $1.2 billion following the successful completion of reviews under the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF). The MPC also noted an improvement in consumer confidence, as reflected in the latest SBP-IBA surveys, while business confidence remained positive but moderated slightly. On the fiscal front, sizable SBP profit transfers helped the overall and primary fiscal balances post surpluses in the first quarter of FY26. Assessing the broader outlook, the committee said the real policy rate remains adequately positive to stabilise inflation within the 5-7% target range over the medium term, while also supporting sustainable economic growth. The rate cut comes days after the release of the IMF&rsquo;s staff report, which reiterated that Pakistan&rsquo;s monetary policy should remain sufficiently tight and data-driven to keep inflation within the SBP&rsquo;s target range. The IMF noted that the central bank&rsquo;s cautious approach had helped manage inflation risks amid volatile conditions and temporary declines in headline inflation.

Banking

The central bank surprisingly cut the policy rate, breaking with market forecasts. The prime minister welcomed the decision, citing economic growth.

Pakistan’s central bank cuts policy rate by 50bps to 10.5% in surprise move

Reuters

SYDNEY: Wall Street futures slipped, gold struck a record high, and Asian stocks wavered on Wednesday, as the deadline passed for a US government shutdown that is expected to delay the release of crucial jobs data and muddy the interest rate outlook. With no clear path out of the impasse, agencies warned that the government shutdown would halt the release of the closely watched September employment report and lead to the furlough of 750,000 federal workers, incurring a daily cost of $400 million. Both S&amp;P 500 futures ESc1 and Nasdaq futures NQc1 dropped 0.5%. Gold prices XAU= climbed to $3,875 an ounce, hitting a record high for third straight session. European futures STXEc1 were little changed. With Friday&rsquo;s non-farm payrolls report absent, investors may place greater weight on the ADP National Employment Report due later today. Forecasts are centred on a modest gain of 50,000 private-sector jobs. &quot;Typically, a shutdown is immaterial for markets. In fact, the 2018-2019 shutdown, which lasted for over a month, actually saw Wall Street rise,&quot; said Kyle Rodda, a senior analyst at <a data-fr-linked="true" href="//Capital.com" style="font-size: 18px;">Capital.com</a>. Rodda added that the issues for markets are twofold, with one being the delay of the release of the non-farm payrolls data. The other one is &quot;US President Trump has also threatened to permanently lay off workers, which could turn the shutdown into a mini-labour market shock,&quot; he said. Futures now imply a 96% chance of a rate cut by the Federal Reserve in October, up from 90% the day before, with around a 74% probability of another move in December.&nbsp; Anthony Saglimbene, chief market strategist at Ameriprise, said in a note that if the shutdown lingers, the September inflation reports, due in mid-October, could also be negatively affected. &quot;An extended period where the US Bureau of Labor Statistics is not operating at full strength could affect data collection efforts for other reports, which may impact the quality of the data,&quot; he said. On Wednesday, Japan&#39;s Nikkei N225 dropped by over 1%, following an 11% surge in the previous quarter. South Korean shares KS11 rose 0.6%, adding to the 11.5% gain in the last quarter, after data showed its exports rose at the fastest pace in 14 months in September. Taiwan&#39;s shares TWII gained 1.3%. The island&#39;s top tariff negotiator stated on Wednesday that Taiwan will not agree to a deal with Washington that would require half of all semiconductor production to take place in the US. Chinese markets, including Hong Kong, are closed for a public holiday. Overnight, Wall Street managed to end the quarter on a positive note, closing higher. Data showed that US job openings increased marginally in August, while hiring declined, and consumer confidence fell by more than expected. In foreign exchange markets, the dollar index =USD held steady after three straight days of losses and was last at 97.84. It was flat at 147.98 yen JPY=EBS, reacting little to a Bank of Japan survey showing Japanese companies expect consumer prices to rise an average 2.4% a year from now, above the central bank&#39;s 2% target. In the Treasuries market, yields were steady in Asia. The benchmark US 10-year Treasury yield US10YT=TWEB was flat at 4.1561%, having risen 1 basis point overnight. Oil prices steadied on Wednesday after two consecutive days of losses as investors weighed potential OPEC+ plans for a larger output hike next month against the prospect of shrinking inventories in the US. US crude CLc1 inched up 0.1% to $62.46 a barrel, while Brent LCOc1 was 0.2% higher at $66.16.

Business

Gold hit a record high and Asian stocks wavered, as a looming US government shutdown delayed key jobs data and increased uncertainty over interest rates and the economic outlook.

Articles tagged with "Interest Rates"

Pakistan’s central bank cuts policy rate by 50bps to 10.5% in surprise move

Stocks retreat, gold hits record as US government shutdown begins