The key policy rate is lowered by SBP by 100 bps to 19.5 pc.

The State Bank of Pakistan (SBP) lowered the benchmark interest rate on Monday from 20.5 percent to 19.5% by 100 basis points (bps).

In an interview with the media, SBP Governor Jameel Ahmeed stated that the Monetary Policy Committee (MPC) of the central bank convened earlier today and decided to lower interest rates in response to the recent slump in inflation.

At a press conference on Monday, SBP Governor Jameel Ahmad stated, “We have noted that the inflation is on a declining trend.”

The MPC noted in a statement released separately that the inflation for June 2024 was marginally better than expected.

The SBP statement further stated, “The Committee determined that the FY25 budgetary measures’ inflationary impact was largely in line with earlier expectations.”

Despite significant debt repayments and other commitments, it was stated that the external account has improved further, as seen by the growth in SBP’s foreign exchange reserves.

“The Committee believed that there was room to further reduce the policy rate in a calibrated manner to support economic activity, while keeping inflationary pressures in check,” the statement read. “These developments, along with the significantly positive real interest rate,” it added.

The monetary policy stance is still “adequately restrictive to lead inflation towards the medium-term target of 5–7%,” according to the MPC, even with the most recent rate drop.

In June 2024, the current account deficit was $410 million, while the inflation rate was reported as 12.6%.

The interest rate was cut by 150 basis points (bps) to 20.5% by the SBP in June of this year.