State Bank Cuts Policy Rate to 15% as Inflation Cools Amid Favorable Economic Trends

The State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC) announced a significant reduction in the policy rate by 250 basis points to 15%, effective November 5, 2024. This decision reflects the central bank’s response to an accelerated reduction in inflation, which has recently moved closer to the SBP’s medium-term target range.

The MPC highlighted several factors contributing to this favorable trend, including a sharp drop in food inflation, stable global oil prices, and the absence of anticipated adjustments in gas tariffs and PDL rates. The committee noted that these developments have collectively accelerated disinflation in recent months, marking a shift in Pakistan’s economic outlook.

However, the MPC also cautioned that while these trends are promising, inflation may experience some near-term volatility before achieving full stability within the desired target range.

This policy rate reduction marks a pivotal moment in Pakistan’s monetary strategy, potentially boosting economic activity by reducing borrowing costs. The SBP’s proactive stance is expected to support further progress towards a stable inflation rate, fostering conditions conducive to long-term economic growth.