Pakistan Central Bank Lowers Key Interest Rates Amid Easing Inflation

Pakistan's central bank cut its key policy rate by 200 basis points to 17.5%, marking the third consecutive reduction since June. This move aims to spur economic growth as inflation eases to single digits. The State Bank of Pakistan's decision follows declines in global oil and food prices.

Pakistan's central bank made a surprising move to cut its key policy rate by 200 basis points to 17.5% on Thursday, the third reduction in a row since June, in an effort to stimulate economic growth as inflation shows signs of easing.

A Reuters poll anticipated a 150 basis point cut following a steady decline in inflation, which hit single digits in August for the first time in almost three years. The State Bank of Pakistan attributed the rapid disinflation to delayed energy price hikes and falling global oil and food prices.

The recent 200 basis point cut follows earlier reductions of 150 basis points in June and 100 in July. These measures have brought down the policy rate from an all-time high of 22% set in June 2023. The central bank is optimistic about achieving a medium-term inflation target of 5–7% and expects foreign exchange reserves to increase as inflows rise after IMF program approval.