Islamabad: The State Bank of Pakistan (SBP) has reduced its key policy rate by 200 basis points, bringing it down to 17.5% from 19.5%, as sourced from an article published on September 12.
According to the details, this decision was made by the Monetary Policy Committee (MPC) in response to several factors affecting the inflation outlook, including falling global oil prices and improved foreign reserves. The committee believes that the current real interest rate is sufficient to reduce inflation to a target range of 5-7% while maintaining macroeconomic stability.
Inflation dropped to 9.6% in August, attributed to lower demand and better food supplies, which, combined with other factors, prompted calls for a significant rate cut. Financial experts had anticipated a reduction between 150 and 200 basis points, with some industry leaders advocating for even larger cuts to stimulate economic growth.
The SBP’s decision follows two previous rate reductions earlier in the fiscal year, and the central bank aims to balance inflation control with the need to inject liquidity into the economy.
The government is also working to meet IMF conditions tied to a USD 7 billion loan, further influencing rate decisions. Experts predict that the rate cut will help spur economic activity, create jobs, and boost the growth rate, which is projected at 3.5% for FY25.
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