SBP cuts interest rate by 100bps to 11%

Karachi (Web Desk): The State Bank of Pakistan (SBP) announced reduction in its benchmark interest rate, lowering it by 100 basis points to 11%.

The new rate will be effective from May 6, 2025, it was announced following a meeting of the Monetary Policy Committee (MPC) on Monday.

The move marks a significant shift in the central bank's stance and reflects growing confidence in easing inflationary pressures.

According to the MPC, the decision was prompted by a notable drop in inflation during March and April, with the trend attributed mainly to lower government-set electricity tariffs and softening food prices.

Additionally, core inflation saw a decline last month, supported by a favourable base effect and subdued domestic demand. These developments contributed to the SBP's more accommodative approach, despite lingering external uncertainties.

The country’s inflation rate dropped sharply in April to just 0.3% year-on-year, a significant decrease from 0.7% in March.

Meanwhile, the current account showed a healthy surplus of $1.2 billion in March, while SBP's foreign exchange reserves inched up to $10.21 billion by the end of April.

Despite these improvements, the rupee saw a slight depreciation of 0.4% during the same period. At the same time, global oil benchmarks and domestic fuel prices also moved lower, offering some relief to import costs.

This policy adjustment follows a steady hold at 12% in the last MPC meeting and underscores a more optimistic outlook from the central bank on inflation management.

However, the MPC emphasized the need for caution due to ongoing risks in the global economy, including uncertain trade policies and persistent geopolitical tensions.

The central bank signaled it would continue to monitor both domestic and external developments to maintain economic stability going forward.