The key policy rate of the State Bank of Pakistan (SBP) has been slashed by 200 basis points to 13%. This marks the fifth consecutive decrease since June. Headline inflation stood at 4.9% year-on-year in November 2024.
On December 17, 2024, the new rate was approved by the SBP’s Monetary Policy Committee (MPC). The main reason for recording the decline in inflation was the decline in food prices, which were exacerbated by the reduced effects of the gas tariff hikes made in November 2023. In addition, core inflation is still recorded at a high level of 9.7%, and the MPC also stated that inflation expectations are volatile.
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The $ 7 billion facility by the International Monetary Fund (IMF) shall be given as a lifeline to revitalize Pakistan’s economy. It was acquired in the month of September. Following the major drop in inflation below last year’s almost 40 percent high, experts predict the rate cut.