The State Bank of Pakistan’s Monetary Policy Committee (MPC) has heeded calls for a substantial reduction in interest rates by lowering the key policy rate by 200 basis points, from 19.5% to 17.5%. This significant move was announced on Thursday.
According to a statement from the SBP, “The Monetary Policy Committee (MPC) has decided to cut the policy rate by 200 basis points to 17.5% in today’s meeting.” The decision reflects the committee’s consideration of various elements influencing the inflation outlook.
State Bank of Pakistan’s MPC Set to Decide on Interest Rate Cut
Financial analysts had anticipated a more modest rate cut, with predictions ranging from 150 to 200 basis points. This latest adjustment is noteworthy, especially following previous reductions that totaled 2.5 percentage points over recent months.
Inflation, which had soared to 38% earlier in the year, has shown signs of easing in recent times. This decline in inflation has provided a conducive environment for the government to boost liquidity within the private sector, aiming to stimulate economic activity and support growth.
Experts suggest that reducing borrowing costs might boost investment and economic activity, which is crucial for generating jobs, especially for young people.
The anticipated growth rate for the current fiscal year is forecasted to increase to 3.5%, up from 2.4% in FY24.
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