Pakistan's Aggressive Rate-Cutting Strategy to Stimulate Economic Growth

Pakistan's central bank has reduced its key policy rate by 100 basis points to 12%, marking the sixth consecutive cut since June in an effort to boost the economy amid declining inflation. The bank has lowered rates by 1,000 basis points since June 2024, with inflation expected to stabilize.

On Monday, Pakistan's central bank made a notable move by cutting its key policy rate by 100 basis points, bringing it down to 12%. This marks the bank's sixth consecutive rate reduction since June, as it strives to rejuvenate business and economic sentiment amid easing inflationary pressures.

Governor Jameel Ahmad highlighted that inflation is projected to ease further in January, although core inflation remains high. The State Bank's monetary policy committee emphasized the necessity of maintaining a cautious approach to monetary policy to ensure price stability, which is crucial for sustainable economic growth.

The rate cut follows a slowdown in consumer inflation to 4.1% in December, the lowest in over six years, largely driven by a high base from the previous year. Pakistan's economy recorded a growth of 0.92% in the first quarter of fiscal 2024-25, and the full-year GDP growth is forecasted at 2.5%-3.5%.

(With inputs from agencies.)