SBP Cuts Interest Rate to 17.5%

The State Bank of Pakistan’s Monetary Policy Committee (MPC) announced a significant cut in the key policy rate, reducing it by 200 basis points to 17.5% from the previous 19.5%. The decision, announced on Thursday, aims to address factors influencing the inflation outlook.

In its statement, the SBP highlighted that the move took into account “various factors impacting the inflation outlook.” Analysts had predicted a decrease ranging between 150 to 200 basis points, but the MPC opted for the upper end of the forecast.

This cut follows previous reductions totaling 2.5 percentage points in recent months. Despite inflation peaking at 38% earlier in the year, the central bank’s decision reflects improved economic conditions, providing an opportunity to boost liquidity in the private sector.

The projected economic growth rate for the current fiscal year is now expected to rise to 3.5%, up from 2.4% in FY24.