SBP cuts interest rate from 100 bps to 11%

During March and April, inflation saw a significant decline, driven primarily by a reduction in administered electricity prices and a continued downtrend in food inflation. Additionally, core inflation eased in April, largely due to a favorable base effect amid moderate demand conditions, as noted by the Monetary Policy Committee.

The Committee acknowledged the rising global uncertainty stemming from trade tariffs and geopolitical developments, recognizing the potential challenges these factors could impose on the economy. Given this backdrop, the Monetary Policy Committee underscored the need for a prudent and balanced monetary policy stance to navigate these uncertainties effectively.

Continuing its downtrend, inflation fell to 0.3 percent y/y in April, driven primarily by food and energy prices. A sharp decline in wheat and allied product prices, moderation in global commodity prices and downward adjustment in electricity tariffs were the major drivers of this ease in food and energy prices.

Moreover, core inflation, after remaining sticky at around 9 percent over the past few months, declined to 8.0 percent y/y in April. Going forward, the Committee anticipates inflation to gradually inch up in the coming months and stabilize within the target range of 5 – 7 percent. This outlook is, however, subject to both upside and downside risks emanating from volatility in wheat and other food prices, timing and magnitude of energy price adjustments, potential global supply-chain disruptions and uncertain commodity price outlook.