FPCCI president demands policy rate to be cut to 9% immediately because Pakistan’s inflation has dipped

Federation of Pakistan Chambers of Commerce & Industry President Atif Ikram Sheikh demanded that the policy rate should be cut down instantaneously to 9% as the inflation scenario in Pakistan merits it today. He said that because the CPI had dipped to 6.9% in September 2024, that direction should also be seen at the policy rate.

As pointed out, Sheikh further emphasizes that even at a 9% policy rate, there will remain a 200 basis point premium, enough to cushion even the most inflation-targeting monetary policies.

He asked for an out-of-turn MPC meeting by the SBP to nudge some much-needed rate adjustments. In fact, arguing that it would be too long of a wait for relief until the next scheduled MPC on November 4, he pointed out that the rate cut would significantly reduce business costs once access to affordable financing is improved.

She added that since the inflation rate has taken a deep drop during the last 16 months from 38 per cent in May 2023 to 6.9 per cent during September 2024, while the policy rate is cut to just 450 basis points from 22 per cent to 17.5 per cent, it widens the gap between the trends of inflation and monetary policy.

He recommended that the policy rate cut by 1% would reduce the debt liability of Pakistan by an amount of Rs. 476 billion, so it will help save funds for the government to be used on development and infrastructure projects. Sheikh proposed reviving temporary economic relief facilities, the export finance scheme, and long-term financing facilities in order to further push growth by promoting investment, industrial growth, and exports.