The State Bank of Pakistan (SBP) has announced a significant interest rate reduction of 2.5%, lowering it from 17.5% to 15%. This marks the fourth consecutive rate cut, amounting to a total decrease of 7% over the recent period. The decision was made during a meeting of the Monetary Policy Committee (MPC), led by the SBP governor, after assessing both local and international economic conditions.
The SBP stated that this move is part of ongoing efforts to stabilize the Pakistani rupee, control inflation, and bolster foreign exchange reserves. Recent data showed inflation had dropped to 7.2% in October, the lowest level in four years, which contributed to the central bank’s decision to cut the interest rate.
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Economists have pointed out that the SBP was in a strong position to make this adjustment, given the stabilizing rupee and foreign exchange reserves reaching a 30-month high. Trade organizations had also advocated for a rate reduction of 3% to 5%, highlighting the need for lower borrowing costs to support economic growth. The overall economic environment, as assessed by the SBP, has paved the way for further monetary policy easing.
