State Bank slashes interest rate by significant 2pc to 17.5pc
Business
Investors had expected reduction in interest rate amid decelerating inflation
KARACHI (Dunya News) – In an unprecedented move, the Monetary Policy Committee (MPC) of the State Bank of Pakistan on Thursday slashed the interest rate by 200bps or 2 percent.
After the reduction, the interest rate comes down to 17.50 percent from 19.50 percent.
Earlier in the day, there were speculations that the central bank would cut policy rate by 150 basis points (bps) or 1.5 percent.
It is the third rate cut since June 2024.
Experts relate the rate cut to easing of inflation. It may be recalled that the finance ministry claimed that annual inflation rate had fallen to 9.6pc in August from 11.1pc the previous month. The inflation rate in August 2024 has come to the lowest level in 34 months, it added.
However, analysts predicted 150bps cut in interest rate to 18pc. They also expected that the MPC would take the policy rate to 16pc or lower by the end of December 2024.
In the last meeting held on July 29, the MPC slashed interest rates by 100bps to 19.5pc.
34-MONTH LOW INFLATION
Earlier, media reported that the core inflation measured by Consumer Price Index (CPI) decelerated further to 9.6 percent during August 2024 to hit the 34-month low level.
The Pakistan Bureau of Statistics (PBS) data showed the CPI inflation was recorded at 11.1 percent in July 2024. However, during the same month last year (August 2023), it was recorded at 27.4pc.
On a month-on-month basis, it increased to 0.4pc in August 2024 compared to an increase of 2.1pc in the previous month and an increase of 1.7pc in August 2023.
