(Web Desk) — The State Bank of Pakistan (SBP) announced on Monday a reduction of 150 basis points in the interest rate, bringing it down to 20.5 percent effective from June 11, 2024.
Prior to this decision, the central bank had maintained the key lending rate unchanged for seven consecutive sessions.
This marks the first time in four years that the SBP has decreased its key lending rate. The last rate cut occurred on June 25, 2020, according to research findings.
In its statement, the Monetary Policy Committee (MPC) observed that the significant decline in inflation since February was largely anticipated, with May’s results surpassing expectations.
“The Committee noted that underlying inflationary pressures are diminishing, supported by a tight monetary policy and fiscal consolidation. This is evidenced by a sustained moderation in core inflation and a decline in inflation expectations among consumers and businesses, as indicated in recent surveys. However, the MPC acknowledged potential short-term risks to the inflation outlook due to forthcoming budgetary measures and uncertainty surrounding future energy price adjustments. Despite these risks and today’s rate cut, the Committee anticipates that the cumulative impact of previous monetary tightening will aid in controlling inflationary pressures.”
This move signifies the first reduction in the key policy rate in four years. The last reduction occurred in June 2020 during the pandemic, following which the rate steadily rose from 7% to a record high of 22%.
