SBP cuts interest rate to 19.5pc

KARACHI: The State Bank of Pakistan (SBP) on Monday announced 1 per cent reduction in the interest rate, bringing it down to 19.5 per cent.

SBP Governor Jameel Ahmad made the announcement during a media briefing following the monetary policy meeting.

“The monetary policy committee decided to reduce the interest rate by 100 basis points, due to downward inflation trend,” he said.

“The reduction in the interest rate reflects our confidence in the current economic trajectory,” he added.

n its statement issued separately, 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.

“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,” it said.

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%”.

Earlier in June this year, the SBP slashed the interest rate by 150 basis points (bps) to 20.5 per cent.