SBP slashes policy rate by 200 basis points

KARACHI: The State Bank of Pakistan (SBP) slashed policy rate by 200 basis points in its monetary policy announced on Monday, ARY News reported.

“At its meeting today, the Monetary Policy Committee (MPC) decided to cut the policy rate by 200 bps to 13 percent, effective from December 17, 2024,” the SBP said in a statement.

It added that the inflation declined to 4.9 percent on a year-to-year basis in November2024, in line with the ‘MPC’s expectations’.

“This deceleration was mainly driven by the continued decline in food inflation as well as the phasing out of the impact of the hike in gas tariffs in November 2023. However, the committee noted that core inflation, at 9.7 percent, is proving to be sticky, whereas inflation expectations of consumers and businesses remain volatile,“ the SBP added.

In October 2024, Pakistan recorded a current account surplus of $349 million, with exports and remittances showing an upward trend. The central bank’s foreign exchange reserves now stand at $12.05 billion, contributing to a total national reserve exceeding $16 billion.

Economic experts have welcomed this decision. Financial Advisor Khurram Shehzad described the rate cut as a positive move for the economy, stating that lower interest rates encourage investment and reduce inflationary pressures. He noted that further rate cuts could be considered if inflation remains within the 5 percent to 7 percent range.

Trader leader Zubair Motiwala also expressed gratitude for the reduction, calling for the interest rate to be brought down to single digits by January to further boost the economy.

Meanwhile, Prime Minister Shehbaz Sharif commended the State Bank for the rate cut, calling it a promising step for the nation’s economy. He highlighted the benefits of reduced inflation, increased investor confidence, and greater economic activity.

The Prime Minister expressed hope for further inflation relief in the coming months and praised the efforts of the Finance Ministry and other related departments in achieving this progress.

This policy adjustment is expected to strengthen the economy and stimulate investments, signaling a positive outlook for Pakistan’s financial landscape.