SBP cuts key policy rate by 200 bps to 17.5%

The State Bank of Pakistan (SBP) on Thursday decided to cut the policy rate by 200 bps to 17.5 percent.

The decision was made during the meeting of Monetary Policy Committee (MPC) and it will be effective from September 13, 2024.

Both headline and core inflation fell sharply over the past two months.

“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,” it read.

The analysts had predicted a decrease of 150 to 200 basis points.

The MPC’s upcoming decision is particularly significant, following previous cuts totaling 2.5 percentage points over the past months, said a financial analyst.

Despite the surge of 38% in inflation this year, recent declines have created an opportunity for the government to enhance liquidity in the private sector.

Experts believe that lowering borrowing costs could stimulate investment and economic activity, which is essential for job creation, particularly for the youth.