SBP cuts key policy rate by 100bps to 19.5pc

KARACHI: The State Bank of Pakistan (SBP) on Monday reduced the key interest rate by 100 basis points (bps) to 19.5 per cent from the previous rate of 20.5pc.

Talking to media, SBP Governor Jameel Ahmeed said the central bank’s Monetary Policy Committee (MPC) met earlier today and decided to reduce interest rate owing to decline in inflation in past months.

“We have noted that the inflation is on a declining trend,” SBP Governor Jameel Ahmad said as he addressed a press conference on Monday.

In its statement issued separately, the MPC observed that the June 2024 inflation was slightly better than anticipated.

“The Committee also assessed that the inflationary impact of the FY25 budgetary measures was broadly in line with earlier expectations,” the SBP statement added.

It said that the external account has continued to improve, as reflected by the build-up in SBP’s FX reserves despite substantial repayments of debt and other obligations.

“Considering these developments – along with significantly positive real interest rate – the Committee viewed that there was room to further reduce the policy rate in a calibrated manner to support economic activity, while keeping inflationary pressures in check,” it said.

The MPC was of the view that despite the latest rate cut, the monetary policy stance remains “adequately tight to guide inflation towards the medium-term target of 5–7%”.

The inflation rate in June 2024 was recorded at 12.6 per cent, while the current account deficit was $410 million.

In June this year, the SBP slashed the interest rate by 150 basis points (bps) to 20.5 per cent.