SBP cuts key rate by 150bps to 20.5%

In an attempt to spur development in the face of a strong decrease in retail inflation, the State Bank of Pakistan (SBP) reduced its benchmark interest rate by 150 basis points on Monday. This was a decision that was largely anticipated and marked the bank’s first rate reduction in almost four years.
Two days ahead of schedule and one week after statistics revealed that inflation had eased to a 30-month low of 11.8% in May, the key rate was decided to be trimmed to 20.5%.
In a statement, the Monetary Poliocy Committee (MPC) observed that although the notable decrease in inflation since February was mostly expected, the May outturn exceeded initial projections.
The Committee concluded that, with fiscal consolidation supporting a restrictive monetary policy stance, underlying inflationary pressures are also lessening.