Pakistan cuts down key interest rate by 100 basis points
The State Bank of Pakistan (SBP) has
announced a 100 basis point reduction in its key interest rate, bringing it
down to 19.5% from the previous 20.5%.
SBP Governor Jameel Ahmad provided
an explanation for the decision, stating that the central bank's Monetary Policy
Committee (MPC) decided on the rate cut due to a recent decline in inflation.
Governor Ahmad noted, “Inflation has
been on a downward trend in recent months,” during the press conference.
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The MPC also highlighted that
inflation figures for June 2024 were slightly better than expected. The
statement added, “The Committee assessed that the inflationary impact of the
FY25 budget measures aligned broadly with earlier projections.”
Additionally, the external account
has shown improvement, with a rise in the SBP’s foreign exchange reserves
despite substantial debt repayments and other obligations.
“Given these developments, along
with a notably positive real interest rate, the Committee saw an opportunity to
further reduce the policy rate in a measured way to support economic activity
while managing inflationary pressures,” the SBP statement explained.
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The MPC emphasized that, even with
this latest cut, the monetary policy remains "adequately tight" to
steer inflation toward the medium-term target of 5–7%.
As of June 2024, inflation was
recorded at 12.6%, and the current account deficit was $410 million. This
latest reduction follows a previous cut in June, when the SBP decreased the
interest rate by 150 basis points to 20.5%.
The move aims to balance economic stimulation with inflation control, reflecting the central bank’s cautious but proactive approach to monetary policy.
Source:
IncPak