In response to the demand of cut in policy rate, the SBP decided to reduce policy rate, lowering it from 15% to 13%. The decision to decrease the policy rate was made in the meeting of Monetary Policy Committee (MPC) in which the significant economic indicators were reviewed. The SBP carefully analysed the macro and micro economic situation in the meeting. The MPC noted positive economic signals, including an increase in high-frequency indicators of economic activity.

This follows the reduction in inflation to 4.9 per cent year-on-year in November, in line with the central bank’s expectations.

In a statement issued by the MPC, it stated the purpose of the move.

“The recent policy rate cut is aimed at bolstering growth, while also ensuring inflation stays within manageable levels,” it said.

“We expect GDP growth for FY25 to fall in the upper half of the projected 2.5%-3.5 %,” it added.

The MPC also pointed out crucial developments, including a surplus current account for the third consecutive month, which brought about boosting foreign exchange reserves to approximately $12 billion.

In addition, the committee noted the surge in the private sector credit on account of easing financial condition.

“While the broad money growth has slowed, credit to the private sector has accelerated, contributing to the ongoing economic recovery,” the MPC said.

The SBP expects that inflation rate will keep low for Fiscal Year25, though the core inflation risks and global commodity price fluctuations could impact the scenario.

The SBP also said that there are expectations of maintaining the trend of rise in remittances and exports, which will continue to bring good news for economy.

The SBP reduced the key interest rate for fifth consecutive time within five months.