SBP cuts policy rate by 250bps

As inflation stays in the single digits through October, the State Bank of Pakistan (SBP) lowered the benchmark policy rate by 250 basis points to 15% on Monday, its fourth consecutive drop.
As inflation eases off recent record highs, authorities continue to work to stabilise a weak economy, and analysts and independent economists generally expected the central bank to further reduce its main interest rate at its policy meeting.

The SBP’s Monetary Policy Committee (MPC) stated that “the tight monetary stance continues to play an important role in sustaining the downward trend in inflation.” The MPC also pointed out that “the inflation has declined faster than expected and has reached close to its medium-term target range in October.”

According to the statistics agency, the South Asian nation’s average consumer price index inflation for the current fiscal year, which began in July, is 8.7%. For the year ending in June, the International Monetary Fund (IMF) projects an average inflation rate of 9.5%.
The central bank last lowered the benchmark policy rate by 200 basis points in September, but in three straight policy meetings since June, it has dropped it to 17.5% from an all-time high of 22%.
Following a dramatic decline in inflation from a multi-decade high of nearly 40% in May 2023, the majority of respondents in a Reuters poll this week predicted a decrease of 200 basis points, stating that reductions were necessary to support growth.