The State Bank of Pakistan (SBP) announced on Monday that it had decided to cut its key policy rate by 100 basis points (bps) to 12 per cent from 13pc amid demands for a major rate cut.
The central bank’s policy rate, after being slashed by 1,000bps from 22pc since June 2024 in six intervals, now stands at 12pc.
In a press conference, SBP Governor Jameel Ahmed announced that the MPC in its meeting today had decided on the interest rate cut keeping the inflation outlook in mind.
In other developments, the central bank chief noted that inflation numbers were bound to come down next month, however he warned that core inflation still remained high.
“Keeping these things in mind, we adopted a cautious approach,” he said, adding that the remittances trend was “good” and so were export numbers, keeping the current account in mind.
Meanwhile, the government had slashed the cut-off yields on treasury bills (T-bills) at the auction last week, which reflected a higher possibility of another interest rate.
T-bill rates were cut by up to 41 basis points as the government raised the amount within the auction target. The return on a 12-month tenor was reduced by 41bps to 11.38pc compared to 49bps at the auction held on Jan 8, making the total reduction of 90bps this month.
Most financial experts and analysts had believed that the SBP would cut the interest rate by 100bps in its MPC meeting today.
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