Policy rate slashed to 11%

Beating the market expectations of a 50 basis points (bps) cut, the State Bank of Pakistan (SBP) has slashed the policy rate by 100 bps to 11%, effective May 6, 2025, reflecting easing inflationary pressures. However, the central bank has highlighted that the broader economic landscape remains fraught with challenges, including sluggish GDP growth, weak large-scale manufacturing, persistent fiscal slippages, and external sector vulnerabilities. Governor SBP, in a press conference along with other Monetary Policy Committee (MPC) members, announced a 100 bps cut, highlighting an improved1 inflation outlook and signs of moderate economic recovery. Beating the market expectations of 0-50bps cut, the central bank has reduced the policy rate by 100bps to 11% in a meeting held today," wrote Topline Securities. "We expect interest rates to come down to 10% by Dec 2025."