KARACHI: The State Bank of Pakistan (SBP) cut its key interest rate by 150 basis points on Monday in a widely expected move, marking its first rate reduction in nearly four years in its effort to boost growth amid a sharp decline in retail inflation.
The decision to cut the key rate to 20.5% comes two days ahead of budget and a week after data showed inflation slowed to a 30-month low of 11.8% in May.
The central bank last changed rates in an emergency meeting in late June last year, when it raised rates by 100 basis points to a record high of 22%.
Economic activity slowed over the last two years in Pakistan as it implemented tough reforms under an International Monetary Fund (IMF) bailout in a bid to stabilise its crashing economy.
Pakistan’s Finance Minister Muhammad Aurangzeb, speaking at a business conference in China last week, said he expected rates to come down in the face of falling inflation.
