Business Desk 
Dec 17, 2024
In a move serving as an indication of a stabilising economy, the State Bank of Pakistan (SBP) cut the policy rate on Monday by 200 basis points (bps), bringing it down to 13%.
The startling descent follows a remarkable drop in headline inflation which decreased to 4.9% in November 2024, raising the chances of recovery for the appalling economy.
This is the fifth consecutive cut as part of the active monetary relaxation measures. The new interest rate is effective from December 17, 2024. The latest policy rate cut accounts for a total, historic 900bps shed during the ongoing year.
The plummeting policy rate is reportedly triggered by fading inflation which dropped to 4.9% year-on-year in November with the core inflation remaining intact. The persisting core inflation is said to be the biggest concern among economic wizards, as SBP notified that future interest rate adjustments will be driven by the posture of the economy.
"The Monetary Policy Committee (MPC) decided to cut the policy rate by 200 bps to 13%, effective from December 17, 2024," said the MPC in a statement.
Analysts say the fifth consecutive cut in the policy rate is prompted by stooping food inflation and the insignificant gas tariff hike in November.
"[It's] an unprecedented monetary easing in CY24, with a cumulative 900bps rate cut over the year," stated AHL Director Equities Tahir Abbas.
Standing at 9.7%, core inflation seemed stuck, whereas consumers' and businesses' inflation expectations were purportedly volatile. The inflation rate is estimated to be around 8-9% in the coming months, which would deter further policy rate cuts.
