The State Bank of Pakistan (SBP) has reduced the key policy rate by 100 basis points (bps) from the previous rate of 20.5 percent to 19.5 pc. Governor SBP, Jameel Ahmed while talking to media persons here on Monday said that Monetary Policy Committee (MPC) of the central bank in its meeting held earlier in the day decided to reduce interest rate keeping in view decline in inflation during past months. Addressing a press conference, he said, “We have noted that the inflation is on a declining trend.” In a separate statement, the MPC observed that the June 2024 inflation was slightly better than anticipated. “The Committee also assessed that the inflationary impact of the FY25 budgetary measures was broadly in line with earlier expectations,” the SBP statement added.

It said that the external account has continued to improve, as reflected by the build-up in SBP’s FX reserves despite substantial repayments of debt and other obligations. If further stated, “Considering these developments – along with significantly positive real interest rate – the Committee viewed that there was room to further reduce the policy rate in a calibrated manner to support economic activity, while keeping inflationary pressures in check.” The MPC was of the view that despite the latest rate cut, the monetary policy stance remains “adequately tight to guide inflation towards the medium-term target of 5–7%”. The inflation rate in June 2024 was recorded at 12.6 per cent, while the current account deficit was $410 million. During June 2024, the SBP slashed the interest rate by 150 basis points (bps) to 20.5 per cent.

Credit: Independent News Pakistan