Pakistan's central bank Karachi on Thursday cut its key interest rate by 200 basis points to 17.5 percent from 19.5 percent, bowing to demands for a major rate cut.
In a statement, the State Bank reported that the Monetary Policy Committee (MPC) decided to reduce the official interest rate by 200 basis points (bp) to 17.5 percent at its meeting on Thursday.
"Several factors affecting the inflation outlook were taken into account in making this decision," he said.
Inflation in August was 9.6 percent, resulting in a positive real interest rate of 10 percent.
Financial experts generally anticipated a reduction of 150 basis points, with some predicting a cut of up to 200 basis points. However, industry leaders advocated a deep cut of 500 basis points to stimulate economic growth.
The Monetary Policy Committee (MPC) assessed that the real interest rate is still positive enough to reduce inflation to the medium-term target of 5 to 7 percent and help ensure macroeconomic stability, the statement said.
The MPC said global oil prices had fallen sharply and the SBP's foreign exchange reserves stood at $9.5 billion as of Sept. 6, despite weak inflows and continued debt repayments.
"Third, government bond yields in the secondary market have declined markedly since the last MPC meeting," he said, adding that "inflation expectations and business confidence have improved in recent surveys, while those of consumers have worsened slightly.
Throughout the FY24 financial year, the SBP kept the interest rate at a maximum of 22 per cent. In recent months, it introduced two consecutive cuts (initially of 150 basis points, followed by a reduction of 100 basis points), bringing the total decline to 2.5 percentage points.
The government that recently took out a $7 billion loan from the International Monetary Fund (IMF) has insisted that it is taking steps to ensure that this is the last time Pakistan turns to the IMF, provided all conditions are met on time. of the IMF.
The projected growth rate for the current fiscal year (FY25) is 3.5 per cent, up from 2.4 per cent in FY24. Experts believe that reducing the cost of borrowing will encourage private sector investment, will stimulate economic activity and create much-needed jobs, particularly for young Pakistanis seeking opportunities abroad.
In a statement, the State Bank reported that the Monetary Policy Committee (MPC) decided to reduce the official interest rate by 200 basis points (bp) to 17.5 percent at its meeting on Thursday.
"Several factors affecting the inflation outlook were taken into account in making this decision," he said.
Inflation in August was 9.6 percent, resulting in a positive real interest rate of 10 percent.
Financial experts generally anticipated a reduction of 150 basis points, with some predicting a cut of up to 200 basis points. However, industry leaders advocated a deep cut of 500 basis points to stimulate economic growth.
The Monetary Policy Committee (MPC) assessed that the real interest rate is still positive enough to reduce inflation to the medium-term target of 5 to 7 percent and help ensure macroeconomic stability, the statement said.
The MPC said global oil prices had fallen sharply and the SBP's foreign exchange reserves stood at $9.5 billion as of Sept. 6, despite weak inflows and continued debt repayments.
"Third, government bond yields in the secondary market have declined markedly since the last MPC meeting," he said, adding that "inflation expectations and business confidence have improved in recent surveys, while those of consumers have worsened slightly.
Throughout the FY24 financial year, the SBP kept the interest rate at a maximum of 22 per cent. In recent months, it introduced two consecutive cuts (initially of 150 basis points, followed by a reduction of 100 basis points), bringing the total decline to 2.5 percentage points.
The government that recently took out a $7 billion loan from the International Monetary Fund (IMF) has insisted that it is taking steps to ensure that this is the last time Pakistan turns to the IMF, provided all conditions are met on time. of the IMF.
The projected growth rate for the current fiscal year (FY25) is 3.5 per cent, up from 2.4 per cent in FY24. Experts believe that reducing the cost of borrowing will encourage private sector investment, will stimulate economic activity and create much-needed jobs, particularly for young Pakistanis seeking opportunities abroad.
