SBP slashes key rate by 100bps to 12% amid easing inflation

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According to Governor Jamil, the State Bank of Pakistan (SBP) on Monday reduced its key policy rate from 100 points to 12 %, which aims to promote business and economic sentiment because Inflation continues to ease. Ahmed

The bank’s governor said at a press conference that inflation rate would decrease further in January, but it noted that basic inflation had increased, adding that the year to June inflation was inflation. The forecast is 5.5 % -7.5 %.

The bank’s Monetary Policy Committee (MPC) said in a statement with the decision, “Considering the dangers of these developments and evolution, the committee found that a careful monetary policy stance was needed to ensure stability in prices. That is essential for sustainable economic growth. “

According to the Central Bank statement, the MPC estimated that the original policy rate needs to be properly positive on the future basis to stabilize inflation in a target limit of 5-7 %.

The central bank has been lowering interest rates from June 2024, which has reduced a record 22 % to 1,000 twenty points.

It is one of the most aggressive rate cutting campaigns among emerging markets, surpassing at least 625 twenty points during the Covade 19 pandemic diseases in 2020.

Decrease

The committee said that since June 2024, the effects of this significant reduction in this rate will continue to expose economic activities and will continue to support them further.

The committee said that inflation continued to trend below as expected, reaching 4.1 percent year by year in December.

The SBP said in its statement, “This trend is driven by moderate domestic demand terms and auxiliary supply side dynamics, between favorable basic effect.”

Consumer inflation rate decreased from 4.1 percent to the lowest level of more than 6-1/2 years in December, which is mainly due to a high base of a year ago.

It was less than the government’s prediction and was significantly lower than 40 % of the multi -decade height in May 2023.

He added, “At the same time, high -frequency indicators continued to improve economic activity.”

GDP Growth forecast

The governor said that the bank has maintained a 2.5 % -3.5 % prediction of GDP’s entire year and said that economic growth will increase over the next six months, which in the country’s first struggle foreign exchange. Will help promote reserves.

The bank’s statement said that “with the expected sense of planned financial arrival, the current account is likely to have a better outlook that by June 2025, the SBPKFX reserves will increase by more than $ 13 billion. “

However, the SBP also highlighted a number of inflation risks, including policies to protect “major economies”.

The United States President Donald Trump has said he is considering imposing taxes on goods from several countries.

IMF and Loan service

Under a question, the governor said that all the steps required by the Central Bank by the International Monetary Fund (IMF) have already been taken and they are confident that the fund review will be in accordance with planning.

The SBP governor also said that $ 7.3 billion loans have already been paid during this financial year and emphasized that further changes in the policy have no major on government loan service. Will not have an effect.

Responding to another question, he also dismissed any concerns about the exchange rate.

Ahmed said that once the Investing Pack platform is launched, ordinary public and corporate firms will be able to buy direct government securities.

According to data approved by the National Accounts Committee, and its data, released in December, increased Pakistan’s economy by 0.92 percent in the first quarter of the financial year 2024-25.

The committee noted: “First, the real GDP growth in Q1-FY25 fell slightly less than MPC expectations. Second, the current account remained in the surplus in December 2024, though SBP’s non Payment has decreased between foreign exchange reserves and more loans.

“Thirdly, despite a significant increase in December, tax revenue remained below the target in H1-FY25. Fourth, global oil prices have been exhibited more volatility in the past few weeks.

“And finally, the environment of the global economic policy has become more uncertain, which has forced central banks to take careful,” the statement said.