SBP slashes key policy rate by 100bps to 12pc

Karachi: The State Bank of Pakistan (SBP) announced on Monday to slash its key policy rate by 100 basis points (bps) to 12 per cent from 13pc.

The central bank’s policy rate, after being slashed by 1,000bps from 22pc since June 2024 in six intervals, now stands at 12pc.

SBP Governor Jameel Ahmed told a presser that the Monetary Policy Committee (MPC), in its meeting today, had decided on the interest rate cut keeping the inflation outlook and other developments in mind.

Earlier, the Monetary Policy Committee met today under the chairmanship of Governor State Bank Jamil Ahmed, after which the first monetary policy of 2025 was announced. 

Experts in a survey on monetary policy have expressed an opinion of a 1.5 per cent reduction and the inflation rate is expected to fall below 3 per cent in January.

The State Bank has reduced the policy rate by up to 9 percent for seven consecutive times, while the base interest rate is currently at 13 percent and Prime Minister Shehbaz Sharif has indicated a further reduction in interest rates.

“The Committee noted that inflation continued to trend downward in line with expectations, reaching 4.1 percent y/y in December. This trend is driven by moderate domestic demand conditions and supportive supply-side dynamics, amidst favorable base effect.

“Inflation is expected to come down further in January before inching up in the subsequent months. The Committee also noted that core inflation, while continuing to ease, is still at an elevated level.

“At the same time, high frequency indicators continued to show gradual improvement in economic activity. The MPC assessed that the impact of the significant reduction by 1,000 bps in the policy rate since June 2024 will continue to unfold and further support economic activity.”