SBP slashes policy rate by 200 basis points in new monetary policy

KARACHI: The State Bank of Pakistan (SBP) made a major cut by reducing 200 basis points in its monetary policy announced for the next 90 days on Thursday.

The central bank slashed the interest rate by two percent to 17.5% in the monetary policy announced today.

The Monetary Policy Committee (MPC) of the central bank met today to fix the policy rate for the next one-and-half month.

Analysts were expecting that the committee will continue monetary easing between 150-200bps on a lower inflation outlook.

The state bank stated that the inflation went down to single digit in August at 9.64 percent. “The inflation continuously going down”.

The central bank said that the growth in current year likely to remain 3.5 percent.

This is the third consecutive cut in the policy rate as the bank had lowered the interest rate by 150bps on June 26, 2024 and 100bps on Jul 29 this year.

Analysts are expecting that policy rate to come down to 14-15 percent in FY25.

The main factor supporting anticipated rate cut is the significant decline in inflation to single digit. Additionally, both headline and core inflation rates in Pakistan have decreased.

The business community had demanded a tangible cut in the interest rate between 300 to 500 basis points in view of the single digit inflation.