KARACHI: The Monetary Policy Committee (MPC) of the central bank decided to cut the policy rate by 200 basis points (bps) to 13 percent, marking its fifth consecutive cut, the State Bank of Pakistan (SBP) said on Monday.
The SBP quoted the decline in headline inflation to 4.9 percent in November 2024 as the reason to lower the policy rate, which will be effective from December 17, 2024.
“This deceleration was mainly driven by the continued decline in food inflation as well as the phasing out of the impact of the hike in gas tariffs in November 2023,” the statement read. The Committee further noted that “core inflation, at 9.7 percent, is proving to be sticky”, whereas inflation expectations of consumers and businesses remain volatile.
As per the central bank statement, the MPC noted that the current account remained in “surplus for the third consecutive month” in October 2024, which, amidst weak financial inflows and substantial official debt repayments, helped increase the SBP’s FX reserves to around $12 billion.
“Second, global commodity prices remained generally favourable, with positive spillovers on domestic inflation and the import bill. Third, credit to the private sector recorded a noticeable increase, broadly reflecting the impact of ease in financial conditions and banks’ efforts to meet the advances-to-deposit ratio (ADR) thresholds. Lastly, the shortfall in tax revenues from the target has widened.”
The monetary committee considering the aforementioned developments viewed the real policy rate as being appropriately positive to stabilise inflation within the target range of 5 to 7%, the SBP statement read.
