Pakistan's Central Bank Cuts Interest Rate Amid Inflation Improvement

Pakistan's central bank has cut its interest rate by 1.5 percentage points to 20.5%, citing a better-than-anticipated decline in inflation. The policy move follows a record-high rate of 22% over the past 11 months. The State Bank of Pakistan expects continued economic growth and stable inflation.

In a significant policy shift, Pakistan's central bank announced on Monday a 1.5 percentage point reduction in its interest rate, bringing it down to 20.5%. This decision follows an observed decline in inflation, which outperformed previous expectations for May.

According to a statement by the State Bank of Pakistan (SBP), this move comes after its Monetary Policy Committee (MPC) conducted a thorough review of the current economic landscape, noting the declining inflation trend. However, the MPC also highlighted potential risks tied to forthcoming budgetary measures and potential changes in energy prices.

Despite these risks, the SBP remains optimistic that the earlier monetary tightening will continue to curb inflationary pressure. The policy change is set to take effect on Tuesday and is anticipated to stimulate economic growth in the upcoming fiscal year starting July 1.

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