The decision, announced after the Monetary Policy Committee (MPC) meeting on Monday, is effective from May 6, 2025.

The SBP noted the sharp drop in inflation during March and April on account of lower electricity tariffs and other commodities’ prices. The major drop in inflation has served as primary reason behind the larger-than-expected cut in policy rate.

The MPC acknowledged ongoing external risks, such as volatile trade policies and geopolitical tensions, and emphasized the importance of maintaining a balanced monetary stance despite easing inflation.

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Ahead of the decision, analysts’ views were mixed. Few anticipated a 50bps cut due to disinflation and improving macroeconomic indicators. In contrast, some other experts expected a status quo, pointing to IMF requirements and delayed foreign inflows.

Earlier, inflation in April slowed to 0.3% YoY, down from 0.7% in March. The current account posted a $1.2 billion surplus in March. SBP’s foreign exchange reserves inched up to $10.21 billion as of April 25. The rupee has dipped slightly by 0.4%, while global oil prices and local fuel rates have also fallen.

The policy rate had been held at 12% during the previous MPC meeting.