The State Bank of Pakistan (SBP) announced a reduction in its key policy rate by 100 basis points taking the interest rate to 12% on Monday, citing an improving inflation outlook and positive trends in exports and remittances.
The rate cut is the latest in a series of reductions since June 2024, which made the cumulative decrease to 1,000 bps over six intervals.
The central bank’s decision aligns with widespread expectations among financial analysts and follows the government’s recent reduction in Treasury bill yields.
SBP Governor Jameel Ahmed, addressing a press conference after the Monetary Policy Committee (MPC) meeting, stressed that the decision was taken cautiously. “While inflation figures are expected to decline next month, core inflation remains a concern,” he noted.
Ahmed added that remittances and export growth were strong, supporting the current position of the account. The government’s T-bar auction also signaled expectations of a rate cut, as yields on the 12-month tenor were reduced to 11.38pc.
The SBP rate cut reflects optimism about economic stabilization but recognizes lingering risks in underlying inflationary pressures. Further updates are expected in upcoming Central Bank policy notices.
