SBP slashes interest rate to 20.5pc

KARACHI: In a big move, the State Bank of Pakistan announced on Monday to cut the interest rate by 150 basis points (bps) to 20.5 per cent.

In a statement, the SBP said the central bank’s Monetary Policy Committee (MPC) had met earlier today and reviewed the current economic developments.

The committee noted that “underlying inflationary pressures are also subsiding amidst tight monetary policy stance, supported by fiscal consolidation”.

At the same time, the MPC highlighted “some upside risks to the near-term inflation outlook associated with the upcoming budgetary measures and uncertainty regarding future energy price adjustments”.

“Second, reduction in the current account deficit has helped improve the foreign exchange (FX) reserves to around $9 billion despite large debt repayments and weak official inflows,” it added.

The SBP last changed rates in an emergency meeting in late June last year, when it raised rates by 100 basis points to a record high of 22%.

It is pertinent to mention here that Finance Minister Muhammad Aurangzeb, speaking at a business conference in China last week, said he expected rates to come down in the face of falling inflation.