The State Bank of Pakistan (SBP) has reduced its policy rate by 1% (100 basis points), bringing it down to 12%. The widely anticipated decision was announced by SBP Governor Jameel Ahmed after a meeting of the Monetary Policy Committee (MPC) in Karachi on Monday.

This marks the sixth consecutive rate cut since June 2024, as the country aims to boost economic activity and business sentiment amid declining inflation.

The SBP has aggressively slashed rates, cutting 1,000 basis points since June 2024 when the policy rate was at a record high of 22%. This reduction surpasses the 625 basis points cut during the COVID-19 pandemic in 2020.

According to the National Accounts Committee, Pakistan’s economy grew by 0.92% in the first quarter of the fiscal year 2024-25, ending in June. The Statistics Bureau released this data in December.

A survey of 15 analysts revealed that 14 had predicted at least a 100-basis-point rate cut, primarily due to a significant decline in inflation.

Prime Minister Shehbaz Sharif on Monday said that the policy rate reduction by 1% by the State Bank of Pakistan would help boost the investors’ confidence in the country’s economy.

The prime minister, in a statement, called the policy rate reduction to 12% a welcome move for the economy and expressed optimism that it would pave the way to increased investment.

He said that the policy rate has been reduced due to the low inflation rate and expressed the hope that the inflation would decrease further in the coming months.

Prime Minister Shehbaz also appreciated the services of Finance Minister Muhammad Aurangzeb and relevant departments to revive the national economy.

The rate cuts reflect efforts to revive economic growth while maintaining price stability in the face of evolving global and domestic challenges.