SBP reduces Key Interest Rate by 100bps, takes it to 12%

KARACHI, January 27, 2025:TheState Bank of Pakistan (SBP)has announced a 100 basis points reduction in the policy rate, bringing it down to 12%, effective January 28, 2025. The decision was unveiled by SBP Governor Jameel Ahmed during a press conference following the Monetary Policy Committee (MPC) meeting. This marks the sixth consecutive policy rate cut, amounting to a cumulative reduction of 1,000 basis points since June 2024. The central bank’s decision aligns with the continued decline in inflation, which stood at 4.1% year-on-year in December 2024. Governor Jameel Ahmed emphasized that while the economic recovery is gaining traction, challenges persist. Inflationary pressures may resurface toward the end of FY25 due to volatile global oil prices, perishable food costs, and external uncertainties. The MPC reaffirmed its commitment to maintaining a cautiousmonetary policystance to ensure price stability and sustainable growth. The SBP’s decision comes as Pakistan navigates a mixed economic landscape, with improved remittances and exports offering optimism but fiscal and inflationary challenges necessitating vigilance.