The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) has decided to cut the policy rate by 200 bps to 17.5 percent, effective from September 13, 2024.
This is the most aggressive reduction in the key policy rate since April 2020.
MPC said in its statement that both headline and core inflation fell sharply over the past two months. The pace of this disinflation has somewhat exceeded the committee’s earlier expectations, mainly due to the delay in the implementation of planned increases in administered energy prices and favourable movement in global oil and food prices.
At the same time, the committee acknowledged the inherent uncertainty related to these developments, which warranted a cautious monetary policy stance.
In this regard, the committee underscored the importance of the tight monetary policy stance in driving the sustained decline in inflation over the past year.