SBP slashes interest rate by 100bps, sets policy rate at 12 precent

The State Bank of Pakistan (SBP) has announced a reduction in its key policy rate by 100 basis points bringing the interest rate to 12 percent on Monday, citing an improved inflation outlook and positive trends in exports and remittances.The rate cut is the latest in a series of reductions since June 2024, bringing the cumulative decrease to 1,000bps over six intervals.The central bank’s move aligns with widespread expectations among financial analysts and follows the government’s recent reduction of treasury bill yields.SBP Governor Jameel Ahmed, addressing a press conference after the Monetary Policy Committee (MPC) meeting, emphasized that the decision was made with caution. “While inflation figures are set to decline next month, core inflation remains a concern,” he noted.Ahmed added that remittances and export growth were strong, supporting the current account position. The government’s T-bill auction last week also signaled expectations of a rate cut, as yields on the 12-month tenor were reduced to 11.38pc.The SBP’s rate reduction reflects optimism about economic stabilization but acknowledges persistent risks in underlying inflationary pressures. Further updates are expected in the central bank’s upcoming policy reviews.