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On Monday, the State Bank of Pakistan (SBP) cut the key policy rate by 100 bps to 12 percent.
After chairing a SBP’s monetary policy committee meeting, State Bank Governor Jamil Ahmad announced the cut in interest rate by one percent at a news conference in Karachi on Monday. The policy rate earlier stood at 13 percent.
The central bank governor also noted that inflation is projected to be at 4.1 per cent by December 2024. In a “positive development,” the current account deficit for December 2024 has turned into a surplus of $582 million.
For the first six months of the current year, the current account deficit was reported at $1.021 billion, according to the SBP governor. The country’s total foreign exchange reserves are currently at $16.19 billion, as highlighted by the SBP.
This is the sixth straight reduction in key policy rate since June as the country attempts to revive business and economic sentiment amid easing inflation.
The central bank has slashed rates by 1,000bps from an all-time high of 22% in June 2024, in one of the most aggressive moves among central banks in emerging markets and topping the 625bps in rate cuts it did in 2020 during the COVID-19 pandemic.
