Pakistan's Central Bank Slashes Interest Rates Amid Easing Inflation

Pakistan's central bank has cut its key policy rate by 100 basis points to 12%, marking the sixth reduction since June. The State Bank of Pakistan has aggressively reduced rates to combat inflation, which has fallen to a low of 4.1% as the economy shows signs of recovery.

In a move aimed at boosting economic activity, Pakistan's central bank has reduced its key policy rate by 100 basis points to 12%. This marks the sixth consecutive cut since June, as the country seeks to revive business sentiment amidst declining inflation rates.

The State Bank of Pakistan has been notably aggressive in its monetary policy, slashing interest rates by 1,000 basis points from a peak of 22% in June 2024. This surpasses the rate cuts made during the 2020 COVID-19 pandemic, highlighting the central bank's strong stance in the emerging markets' monetary strategy.

Despite expectations, the central bank's rate cut comes as consumer inflation has subsided to a six-and-a-half-year low of 4.1% in December, a significant drop from the previous year's high base. This reflects positively on the government's forecast, showing a noteworthy economic recovery with a GDP growth of 0.92% in the first quarter of the fiscal year 2024-25.

(With inputs from agencies.)