Macroeconomic Forecast Pakistan

Pakistan's central bank decided to keep its benchmark interest rate on pause at 13.00% in September, despite headline consumer price inflation slowing to a 20-month low of 10.7% y-o-y. While we acknowledge that the inflationary picture is far from benign - September's m-o-m increase of 1.7% was the highest since last October - we still believe that further rate cuts are in the pipeline this year. We are forecasting an end-2009 interest rate of 10.00%, albeit with growing upside risks.

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