The State Bank of Pakistan (SBP) has announced a 100 basis points cut in the policy rate, reducing it to 12 percent. This change came during the first monetary policy of 2025, which was revealed by the SBP Governor, Jameel Ahmad, in a press conference following the Monetary Policy Committee (MPC) meeting. The new rate is effective from December 17, 2024.
The decision to lower the policy rate is part of the SBP’s strategy to support economic growth and address inflationary pressures. Governor Jameel Ahmad stated that inflation in Pakistan has been gradually decreasing, with the rate dropping to 4.1 percent in December 2024. The inflation forecast for the fiscal year 2024-25 is expected to remain between 5 and 7 percent.
Additionally, the SBP Governor highlighted that economic activities in the country are showing signs of recovery. Pakistan's current account remained surplus, with over $580 million recorded. As of the latest data, the country holds $16.19 billion in foreign reserves, a positive sign for the nation’s economic stability.
This latest rate cut follows a series of reductions, with the SBP having slashed the policy rate by a total of 1000 basis points over the last eight monetary policy announcements. The reduction in interest rates aims to stimulate economic growth by encouraging borrowing and investment while managing inflation.
Monetary policy, especially the adjustment of interest rates, plays a significant role in controlling inflation, stabilizing the economy, and fostering sustainable growth. If implemented effectively, the recent policy adjustments could contribute to restoring economic confidence, improving purchasing power, and supporting long-term development.
