The State Bank of Pakistan (SBP) has reduced its reference interest rate by 100 basic points to 11%. The decision, announced after the meeting of the Monetary Policy Committee (MPC) on Monday, will enter into force as of May 6, 2025.
According to the MPC, the rate cut follows a strong decrease in inflation during March and April, largely driven by the reduction of administered electricity rates and relieve food prices.
Central inflation also fell in April, helped by a favorable base and a moderate demand.
“This cut is higher than market expectations,” said Mohammed Sohail, CEO of Topline Securities, said a local media that added that analysts had mainly anticipated a reduction of 50 bp or a retention due to global uncertainties.
Despite the best inflation trajectory, the MPC recognized the current global risks, including uncertainty about commercial tariffs and geopolitical tensions, and emphasized the need to maintain a balanced monetary posture.
The analysts had divided before the meeting. While Arif Habib Limited expected a 50bps cut citing the disinflation and stability of the macro.
The values of the upper line and other economists had not predicted changes, pointing out conditionalities of the IMF and unresolved foreign entries.
The April inflation rate stood at 0.3% year -on -year, significantly lower than 0.7% in March, while Pakistan’s current account recorded a surplus of $ 1.2 billion in March. SBP Forex reserves increased slightly to $ 10.21 billion to April 25.
The policy rate was previously held at 12% at the last MPC meeting.
Since then, rupee has depreciated at 0.4%, while international oil prices and local gasoline rates have ruled out.
