The State Bank of Pakistan (SBP) lowered the benchmark policy rate by 250 basis points to 15% on Monday, its fourth consecutive drop.
As inflation eases off recent record highs, authorities continue to work to stabilize a weak economy, and analysts and independent economists generally expected the central bank to further reduce its main interest rate at its policy meeting.
The SBP’s Monetary Policy Committee (MPC) stated that “the tight monetary stance remains to serve an important role in sustaining the recent decline in inflation.” The MPC also pointed out that the inflation had dropped more quickly than anticipated and had approached its medium-term goal range in October.
A significant drop in food inflation, favorable global oil prices, and the lack of anticipated changes in gas tariffs and PDL rates in recent months were cited by the MPC, which convened Monday to set the rate, as the reasons for the disinflation.
According to the statistics agency, the South Asian nation’s average consumer price index inflation for the current fiscal year, which began in July, is 8.7%. For the year ending in June, the International Monetary Fund (IMF) projects an average inflation rate of 9.5%.
Even though inflation has dropped significantly from a multi-decade peak of around 40% in May 2023 and the economy has begun to slowly recover, economists believe more rate cuts are necessary to support growth.
Inflation for October was 7.2%, which was little higher than the 6%–7% the government had predicted. In November, the finance ministry anticipates that inflation would further decline to 5.5% to 6.5%.
The central bank recently lowered the benchmark policy rate by 200 basis points in September, but in three straight policy meetings since June, it has dropped it to 17.5% from an all-time high of 22%.
