SBP slashes interest rate by 1%

SBP Governor Jameel Ahmed outlines that remittance inflows and export numbers were also undergoing positive trend
An undated image. — Adobe Stock

An undated image. — Adobe Stock

In line with the inflation's persisting downward trend, the State Bank of Pakistan (SBP) on Monday slashed the policy rate by 100 basis points (bps).

After registering six consecutive cuts, the latest drop brings the key policy rate in Pakistan to 12%, which previously stood at 13%.

“The Committee noted that inflation continued to trend downward in line with expectations, reaching 4.1% y/y [year-on-year] in December," read a statement issued by the SBP.

“This trend is driven by moderate domestic demand conditions and supportive supply-side dynamics, amidst favourable base effect,” it highlighted, adding that inflation was “expected to come down further in January before inching up in the subsequent months.”

In a press conference held on Monday regarding the reduction in interest rate, SBP Governor Jameel Ahmed said the Monetary Policy Committee (MPC) decided to cut the policy rate in the wake of inflation and other factors.

This reduction in policy rate forms part of the 1,000 bps drop since June 2024 and is expected to drive economic activity in the country, as noted by the MPC.

During the presser, the SBP chief outlined that remittance inflows and export numbers were also undergoing a positive trend, terming them “good” given the current account.