State Bank of Pakistan cuts interest rate by 2% to 13%

The central bank of Pakistan has reduced its key policy rate by 200 basis points, bringing it down to 13%. This marks the fifth consecutive rate cut since June, driven by ongoing efforts to stimulate the economy amid easing inflation. Such a monetary policy adjustment is aimed at revitalizing economic activity, potentially making borrowing cheaper for businesses and consumers, and encouraging investment and spending.

Throughout 2024, Pakistan’s central bank has aggressively cut interest rates by a cumulative 900 basis points. This series of cuts is even more substantial than during the pandemic year of 2020, when the bank reduced rates by a total of 625 basis points. This aggressive monetary easing underscores the central bank’s commitment to stimulating the economy and tackling the challenges of sluggish growth and easing inflation.

The central bank also stated that it anticipates inflation to average “substantially below” its previous forecast range of 11.5% to 13.5% for the year 2025. This revised outlook further underscores the confidence in their ongoing economic measures and the potential for a more stable economic environment moving forward.