ISLAMABAD, Jan. 28 (Xinhua) -- The State Bank of Pakistan (SBP) announced on Monday a 100 basis points (bps) reduction in its key policy rate, lowering it to 12 percent in response to mounting calls for a significant rate cut.
Governor of the SBP Jameel Ahmad told a media briefing that the Monetary Policy Committee (MPC) decided to lessen the interest rate after assessing the inflation outlook and other economic developments.
The decision marks the sixth reduction since June 2024, when the rate stood at 22 percent, resulting in a cumulative cut of 1,000 bps over the period.
The governor highlighted a positive trend in remittances and noted that headline inflation was expected to decline further in January, following its drop to 4.1 percent year-on-year in December 2024.
"Given these factors, we adopted a cautious approach," said the governor, adding that exports and remittances had performed well, which, coupled with a manageable current account balance.
On the foreign exchange (FX) reserves, the governor reiterated the central bank's target of reaching 13 billion U.S. dollars by the end of June 2025, despite low financial inflows and high debt repayments.
In a subsequent statement, the SBP highlighted the downward trend in inflation, driven by moderate domestic demand, supply-side improvements, and favorable base effects.
The MPC also emphasized concerns over persistent core inflation, which remains high despite the overall trend of easing price pressures.
The statement highlighted key developments influencing the decision, including low real GDP growth, current account surplus in December 2024, below-target tax revenue, and heightened fluctuations in oil prices over recent weeks.
In light of these developments, the MPC deemed a cautious monetary policy stance necessary to maintain price stability while supporting economic recovery, added the statement. ■
