SBP reduces key policy rate by 200bps to 17.5pc

Karachi: The State Bank of Pakistan (SBP) on Thursday announced to reduce the interest rate by 200 bps to 17.5 percent.

Decision was made during the meeting SBP’s Monetary Policy Committee (MPC).

The new policy will come into force from Friday (September 13).

The pace of this disinflation has somewhat exceeded the Committee’s earlier expectations, mainly due to the delay in the implementation of planned increases in administered energy prices and favourable movement in global oil and food prices.

At the same time, the Committee acknowledged the inherent uncertainty related to these developments, which warranted a cautious monetary policy stance.

In this regard, the Committee underscored the importance of the tight monetary policy stance in driving the sustained decline in inflation over the past year.

The MPC noted that global oil prices have fallen sharply, though they remain volatile while SBP’s FX reserves are around $9.5 billion as of September 6, despite weak official FX inflows and continued debt repayments.

The state bank in a statement issued said market yields of government securities have declined noticeably since the last MPC meeting.

Fourth, inflation expectations and confidence of businesses have improved in the latest pulse surveys, while those of consumers have worsened slightly.