Pakistan's central bank cuts key interest rate by 100 basis points to 12%

Pakistan's economy grew 0.92 per cent in the first quarter of fiscal 2024-25 which ends in June, according to data approved by the National Accounts Committee, released by its Statistics Bureau in Dec

Pakistan's central bank cut its key policy rate by 100 basis points to 12 per cent on Monday, for a sixth straight reduction since June as the country attempts to revive business and economic sentiment amid easing inflation. 

The State Bank of Pakistan has slashed rates by 1,000 bps from an all-time high of 22 per cent in June 2024, one of the most aggressive moves among central banks in emerging markets and exceeding its 625 bps of rate cuts in 2020 during the COVID-19 pandemic. 

The bank's governor Jameel Ahmad said at a press conference that the inflation rate would ease further in January but noted core inflation remained elevated. He said the forecast for full-year inflation in the year to June was an average of 5.5 per cent-7.5 per cent. 

"Considering these developments and evolving risks, the Committee viewed that a cautious monetary policy stance is needed to ensure price stability, which is essential for sustainable economic growth," the bank's monetary policy committee (MPC) said in a statement accompanying the decision. 

"In this regard, the MPC assessed that the real policy rate needs to remain adequately positive on a forward-looking basis to stabilize inflation in the target range of 5-7 percent." Fourteen of 15 analysts surveyed by Reuters expected the central bank to cut its key rate by at least 100 bps mainly due to a drop in inflation. 

Pakistan's consumer inflation rate slowed to an over 6-1/2-year low of 4.1 per cent in December, largely due to a high year-ago base. That was below the government's forecast and significantly lower than a multi-decade high of around 40 per cent in May 2023. 

Pakistan's economy grew 0.92 per cent in the first quarter of fiscal 2024-25 which ends in June, according to data approved by the National Accounts Committee, and released by its Statistics Bureau in December. 

The governor said the bank maintained its forecast of full-year GDP growth at 2.5 per cent-3.5 per cent.  (Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)