The State Bank of Pakistan (SBP) on Monday reduced the policy rate by 100 basis points, bringing it to 12%, during the first monetary policy announcement of 2025. The new rate will take effect from December 17, 2024, according to a statement released by the central bank.
Inflation Declining Gradually
SBP Governor Jameel Ahmad, who chaired the Monetary Policy Committee (MPC) meeting, shared the update during a press conference. He highlighted that inflation in Pakistan has been on a downward trend, dropping to 4.1% in December 2024.
The governor projected that inflation would remain between 5% and 7% during the fiscal year 2024-25, signaling improvements in the country’s economic outlook.
Economic Activities Show Improvement
Governor Ahmad also emphasized the increasing momentum of economic activities. He noted that Pakistan’s current account surplus stands at over $580 million, a positive indicator of economic stability.
Additionally, the country’s foreign reserves currently amount to $16.19 billion, providing a cushion for its economic needs.
Historic Policy Rate Cuts
The SBP has reduced the policy rate by a total of 1,000 basis points over the last eight monetary policy announcements. This consistent approach is aimed at stabilizing the economy and encouraging investment by lowering borrowing costs.
Monetary Policy and Economic Stability
The SBP reiterated the importance of monetary policy in managing inflation and fostering sustainable economic growth. Measures like adjusting interest rates help regulate money supply, curb inflationary pressures, and restore consumer confidence.
If these strategies are effectively implemented, they are expected to strengthen purchasing power and provide a stable foundation for long-term development in the country.
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