Karachi: The State Bank of Pakistan (SBP) on Monday announced that it had decided to cut the key interest rate by 100 basis points (bps) to 19.5 percent from the previous rate of 20.5pc, effective from July 30, 2024.
Addressing a press conference in Islamabad, SBP Governor Jameel Ahmad said the central bank’s Monetary Policy Committee (MPC) had met earlier today and reviewed the current economic developments, highlighting inflation had declined from a record-high of 38pc in May to 12.6 last month.
The MPC statement issued by the central bank said that the committee observed that the June 2024 inflation was slightly better than anticipated, adding that it also assessed that the inflationary impact of the fiscal year 2025 budgetary measures was broadly in line with earlier expectations.
It also noted that the external account has continued to improve, as reflected in SBP’s foreign exchange reserves “despite substantial repayments of debt and other obligations”.
Due to these reasons, the committee “viewed that there was a room to further reduce the policy rate in a calibrated manner to support economic activity, while keeping inflationary pressures in check”.
On positive developments, the statement said that the current account deficit had narrowed in the fiscal year 2024 and SBP’s FX reserves had “improved significantly from $4.4 billion at end-June 2023 to above $9.0 billion”.