Pakistan's Central Bank Implements Aggressive Rate Cut Strategy

Pakistan's central bank reduced its key policy rate by 100 basis points to 12% in a continuous effort to boost economic growth amid easing inflation. This marks the sixth rate reduction since June, illustrating one of the most assertive central bank actions in emerging markets.

Pakistan's central bank made a strategic move on Monday by cutting its key policy rate by 100 basis points to 12%. Governor Jameel Ahmad announced this decision as part of ongoing efforts to stimulate business and economic activities amid declining inflation rates. This marks the sixth consecutive rate reduction since June.

The reduction reflects the central bank's aggressive approach, slicing rates by a total of 1,000 basis points from the all-time high of 22% recorded in June 2024. Such decisive action positions Pakistan among the most proactive central banks in emerging markets, even surpassing the 625 basis point cuts seen during the 2020 COVID-19 pandemic.

Despite the eased inflation, core inflation remains a concern, as noted by Ahmad, who projected a full-year inflation forecast of 5.5%-7.5%. Analysts had anticipated this rate cut, mainly due to the slowed consumer inflation, which hit a 6-1/2-year low of 4.1% in December. Pakistan's economy is projected to grow at 2.5%-3.5% for the fiscal year ending in June 2025.

(With inputs from agencies.)