SBP reduces interest rate to 11% with 100bps cut

The State Bank of Pakistan has decided to reduces its main interest rate by 1% to 11%. This change, announced after the Monetary Policy Committee meeting, will come into effect on May 6, 2025.

The decision was made because inflation dropped sharply in March and April. This was mostly due to lower electricity prices and cheaper food. Core inflation also went down in April because of a good comparison with last year and lower demand.

Market experts were surprised by the size of the cut. Most expected either no change or a smaller cut of 0.5%, especially given global uncertainties.

Even though inflation is falling, the committee warned that there are still risks around the world, like trade issues and political tensions. They said it’s important to keep the right balance in policy decisions.