The State Bank of Pakistan (SBP) has announced a significant policy shift by cutting the interest rate by 150 basis points (bps), bringing it down to 20.5 percent. This decision, made in anticipation of the upcoming annual budget, follows recent data indicating that inflation has slowed to a 30-month low of 11.8 percent in May.
Despite this positive development, the Monetary Policy Committee (MPC) has expressed concerns about a potential spike in inflation in July 2024, forecasting a significant increase from current levels.
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This decision marks the first instance of monetary easing by the SBP in four years, since June 25, 2020, highlighting a pivotal change in the bank’s approach to managing the economy.
