SBP Slashes Policy Rate by 200 Basis Points

Pakistan’s central bank reduced its key policy rate by 200 basis points to 13% on Monday, marking its fifth consecutive cut since June.

The State Bank of Pakistan (SBP) announced the decision following its monetary policy committee meeting. “Overall, the Committee assessed that its approach of measured policy rate cuts is keeping inflationary and external account pressures in check, while supporting economic growth on a sustainable basis,” the committee said.

This year’s rate cuts make Pakistan one of the most aggressive among emerging markets, excluding exceptions like Argentina. The SBP highlighted that inflation is now expected to average “substantially below” its earlier projection of 11.5% to 13.5% for 2025.

However, the bank cautioned that risks to the inflation outlook remain, including potential revenue-focused government measures, food price fluctuations, and rising global commodity prices. “Inflation may remain volatile in the near term before stabilizing in the target range,” it added.

Pakistan’s economy, struggling with a challenging recovery, has been bolstered by a $7 billion International Monetary Fund (IMF) facility approved in September, which provides critical financial support as the country works toward economic stabilization.