Policy rate slashed for sixth time

The monetary policy committee (MPC) of the State Bank of Pakistan (SBP), in its meeting on Monday, announced the sixth successive reduction in policy rate, bringing it down by 100 basis points (bps) to 12%, effective January 28, 2025. The decision comes amid key economic developments, including improved activity in the real sector, a cumulative surplus in current account, a significant increase in revenue and a rapidly declining inflation. "At its meeting today (Monday), the MPC decided to cut the policy rate by 100 bps to 12%, effective from January 28, 2025," SBP Governor Jameel Ahmad said at a press conference after the meeting. The decision reflects optimism over declining inflation, which reached 4.1% in December, driven by moderate domestic demand and supportive supply-side factors.