The State Bank of Pakistan (SBP) reduced the key interest rate by 100 basis points (bps) on Monday, lowering it from 20.5% to 19.5%.
SBP Governor Jameel Ahmad announced the decision during a press conference. He stated that the central bank’s Monetary Policy Committee (MPC) met earlier in the day and decided to reduce the interest rate due to a decline in inflation in recent months.
“We have noted that inflation is declining,” said Governor Ahmad.
The MPC noted that June 2024 inflation was slightly better than expected in its statement. The committee also assessed that the inflationary impact of the FY25 budgetary measures aligned with earlier expectations.
The statement highlighted that the external account has improved, evidenced by the buildup in SBP’s FX reserves despite significant debt repayments.
“Considering these developments and the significantly positive real interest rate, the Committee saw room to reduce the policy rate further in a calibrated manner to support economic activity while keeping inflation in check,” the statement read.
Despite the rate cut, the MPC believes the monetary policy stance remains “adequately tight to guide inflation towards the medium-term target of 5–7%.”
Inflation in June 2024 was recorded at 12.6%, while the current account deficit stood at $410 million. In June this year, the SBP had previously slashed the interest rate by 150 bps to 20.5%
 reduced the key interest rate to 19.5%, citing a decline in inflation and an improved external account.){kind=link}