Stocks jumped significantly on Friday thanks to mild inflation reports for October. This has led to increased hopes that the central bank will keep its strict monetary policies in the next meeting on November 4. If this happens, it could lower borrowing costs and help the economy grow.
The Pakistan Stock Exchange’s main index rose sharply, gaining 1,893.09 points to reach 90,859.85 points, peaking at 91,133.28 points during the day, compared to 88,966.76 points on Thursday.
Ahsan Mehanti from Arif Habib Corp noted that stocks rebounded quickly due to encouraging news about consumer price index (CPI) inflation at 7.2% in October and the IMF’s updated forecast of 9.5% for the country.
“Expectations of a possible interest rate cut next week and an increase in central bank reserves to $11.2 billion sparked this exceptional market activity,” said Mehanti.
Pakistan’s central bank reserves grew by $116 million to $11.156 billion as of the week ending October 25, while total reserves increased by $32 million to $16.049 billion. However, commercial banks saw a decrease of $83 million, bringing their reserves to $4.893 billion.
The rise in reserves came after Pakistan’s current account showed a surplus of $119 million in September, marking the second month in a row with a surplus, following a $29 million surplus in August and a $218 million deficit the previous month.
The foreign reserves also benefited from receiving the first instalment of $1.03 billion from the IMF as part of a $7 billion assistance program.
Pakistan’s annual inflation rate stood at 7.2% in October 2024, up from 6.9% in September but much lower than last year’s 26.8%, according to data released by the Pakistan Bureau of Statistics. This decline in inflation is noteworthy, especially after reaching a peak of 38% last year.
With a central bank meeting approaching to discuss the existing policy rate of 17.5%, financial analysts predict a possible reduction of up to 200 basis points.
If this reduction occurs, it would be the fourth cut since June, driven by declining inflation rates, an improving current account deficit, and increased remittances from workers abroad.
