In a massive cut, SBP reduces key policy rate by 200bps to 17.5%
1. Decision comes in light of last month's significant drop in inflation rate
The State Bank of Pakistan (SBP) announced on Thursday that the Monetary Policy Committee (MPC) has reduced the key policy rate by 200 basis points, lowering it from 19.5% to 17.5%. This decision follows a notable easing of inflation, which has fallen to single digits for the first time in almost three years.
The new rate will come into effect on September 13, 2024.
According to the central bank's statement, both headline and core inflation saw a significant drop over the past two months.
“The pace of this disinflation has slightly exceeded the Committee’s earlier expectations, primarily due to delays in planned hikes to energy prices and favorable trends in global oil and food prices,” the statement said.
The MPC also acknowledged the uncertainty surrounding these developments and emphasized the need for a cautious approach. It stressed that the tight monetary policy played a crucial role in driving the sustained reduction in inflation over the past year.
