The State Bank of Pakistan (SBP) has announced a significant 200 basis points cut in its key policy rate, bringing it down to 17.5 per cent from 19.5pc. The Monetary Policy Committee took this decision to address various factors impacting the inflation outlook, with the aim of achieving macroeconomic stability.
Global oil prices have fallen sharply, and despite weak inflows, SBP’s foreign reserves are stable at $9.5 billion. Inflation expectations have improved, while real interest rates remain positive to meet the medium-term target of 5 to 7 per cent.
Financial experts had anticipated a rate cut, with predictions ranging from 150 to 200 basis points. Industry leaders advocated for a more significant reduction of 500 basis points to boost economic growth.
With inflation on a decline and an optimistic growth rate projection for FY25, reducing the cost of borrowing is expected to drive private sector investment, stimulate economic activity, and create job opportunities for young Pakistanis.