SBP cuts interest rate by 2.5% to 15%

A statement issued by the SBP said that a meeting of the Monetary Policy Committee was held, which decided to reduce the basic policy rate by 250 basis points to 15 percent, which will be effective from November 5, 2024.

According to the statement, the committee noted that inflation has come down faster than expected and has reached close to its medium-term target limit in October.

It is further highlighted that the rapid decline in food inflation, favorable global oil prices, expected gas tariffs and petroleum development levies were not adjusted, resulting in lower inflation.

"The MPC now expects average inflation for FY24 to be significantly lower than the previous forecast range of 11.5 to 13.5 per cent.

The committee's analysis was also that the scenario was subject to risks such as the turmoil in the Middle East conflict, the resurgence of food inflationary pressures, ad hoc changes in government prices and the implementation of emergency tax measures to offset the shortfall in revenue collection.

Most experts had opined that the central bank would cut by 200 basis points, the fourth consecutive rate cut since June, mainly due to lower inflation, lower current account deficit and higher remittances.

It should be noted that the inflation rate was recorded at 7.17 percent on an annual basis in October, while in September, the pace of inflation on an annual basis fell to a 44-month low of 6.9 percent.

It may be recalled that on June 10, 2024, the State Bank of Pakistan announced a reduction in interest rate after four years and announced to reduce it by 1.5 percent, after which the basic interest rate came down from 22 to 20.5 percent.

Later, on July 29, Sbp Governor Jamil Ahmed announced to reduce the interest rate from 20.5 percent to 19.5 percent while giving a press briefing on monetary policy in Karachi.

On September 12, the SBP announced a new monetary policy, cutting the basic interest rate by 200 basis points to 17.5 percent.