The State Bank of Pakistan (SBP) announced on Monday a reduction of 100 basis points (bps) in the key policy rate, bringing it down to 12 percent from 13 percent.
Following the decision made by the Monetary Policy Committee (MPC), the Governor SBP, Jameel Ahmed, on January 27, 2025, made the announcement stating that the decision was based on positive economic signals, a notable decrease in inflation, current account deficit, and a series of rate cuts since June 2024.
The policy rate now stands at 12 percent, a total reduction of 1,000 bps since it was 22 percent last June.
Analysts had widely anticipated the 100 bps cut, noting that recent government measures have helped reduce inflationary pressures.
In December 2024, the central bank had already lowered the rate by 200 bps to 13 percent. Over the last five MPC meetings, the SBP has cut the rate by a total of 900 bps.
The SBP’s official statement highlighted that “headline inflation declined to 4.9 percent year-on-year in November 2024,” in line with the MPC’s expectations.
The decline was mainly due to a continued decrease in food inflation and the fading impact of the gas tariff hike introduced in November 2023.
