State Bank of Pakistan Cuts Key Policy Rate by 250 Basis Points to 15% Amid Easing Inflation

The State Bank of Pakistan (SBP) announced a 250-basis-point reduction in its key policy rate, bringing it to 15% as inflation remains in single digits. This marks the SBP’s fourth consecutive rate cut, aimed at supporting economic recovery and capitalizing on eased inflationary pressures.

The central bank’s Monetary Policy Committee (MPC) attributed the decrease to several factors, including a sharp drop in food inflation, favorable global oil prices, and stable domestic energy tariffs. October inflation fell to 7.2%, close to the government’s forecast, further reinforcing the central bank’s decision to ease the rate.

The SBP’s ongoing cuts have moved the policy rate down from a record high of 22% in May 2023 to 15%, aiming to stimulate growth as Pakistan recovers from economic volatility. According to the International Monetary Fund (IMF), which recently approved a $7 billion loan for Pakistan, inflation is expected to average 9.5% in the fiscal year ending June 2025, while GDP growth is projected at 3.2%, an improvement from last year’s 2.4%.

However, economists caution that inflation could rise again in 2025 due to possible increases in energy prices and new taxes scheduled to take effect in January. The SBP’s MPC noted these risks but expects near-term inflation to stabilize within target levels.

This rate reduction, coupled with IMF support, reflects the SBP’s efforts to balance inflation control with economic growth, ensuring stability for Pakistan’s economy as it moves toward recovery.