The Pakistan State Bank (SBP) has reduced its reference interest rate by 100 base points to 11%. The decision, announced after the meeting of the Monetary Policy Committee (MPC) on Monday, will take effect from May 6, 2025.
According to the MPC, the drop in rates follows a sharp drop in inflation in March and April, largely driven by a reduction in the electric prices administered and an attenuation of food prices.
Basic inflation also dropped in April, helped by a favorable base and moderate demand.
“This reduction is higher than market expectations,” said Mohammed Sohail, CEO of Topline Securities, a local media adding that analysts had mainly planned a reduction of 50 SBPS or taking due to global uncertainties.
Despite the improvement in the inflation trajectory, the MPC has recognized the current global risks, including uncertainty on commercial prices and geopolitical tensions, and highlighted the need to maintain a balanced monetary position.
Analysts had been divided before the meeting. While ARAF HABIB LIMED expected a cut of 50 SBPS citing disinflation and macro stability.
The securities and other economists had predicted any change, pointing to IMF conditions and unresolved foreign entrances.
The April inflation rate amounted to 0.3% in annual sliding, much less than 0.7% of March, while the Pakistan current account posted an excess of $ 1.2 billion in March. SBP Forex reserves increased slightly to $ 10.21 billion on April 25.
The policy rate has already taken place at 12% at the last MPC meeting.
The rupe has since depreciated 0.4%, while international oil prices and local fuel rates increased downwards.
