Pakistan's Central Bank Slashes Rates to Boost Economy Amid Easing Inflation

Pakistan's central bank reduced its key policy rate by 250 basis points to 15% to stimulate economic growth as inflation slows. This is the fourth rate cut since June. Despite dropping inflation rates, analysts caution potential future increases due to energy prices and tax impacts in 2025.

Pakistan's central bank announced a significant reduction in its key policy rate by 250 basis points to 15%, marking the fourth consecutive cut since June as it attempts to rejuvenate a tepid economy amid easing inflation pressures.

According to a Reuters poll, the move was generally anticipated, following a sharp decline in inflation from nearly 40% in May 2023. The central bank's efforts, with a total reduction of 700 basis points in under five months, reflect a broader strategy to galvanize growth, with average inflation hovering around 8.7% this financial year.

While recent data points to further ease in inflation, with October recording 7.2%, future projections remain uncertain. Analysts warn of a potential uptick in 2025 due to anticipated hikes in electricity and gas prices, following a $7-billion IMF bailout, and new taxes scheduled for January 2025.

(With inputs from agencies.)