ISLAMABAD, Sept. 12 (Xinhua) -- The State Bank of Pakistan (SBP) announced on Thursday a 200 basis points cut in its policy rate, bringing it down to 17.5 percent with effect from Friday, said a statement.
The SBP said that the decision was made by its Monetary Policy Committee following a significant drop in both headline and core inflation over the past two months.
The bank attributed the accelerated disinflation to delays in planned energy price hikes and favorable global oil and food prices, which exceeded the committee's earlier expectations.
Despite the positive developments, the SBP highlighted the surrounding uncertainty, emphasizing the need for a cautious monetary policy stance to ensure sustained inflation decline.
The bank added that the headline inflation eased to 9.6 percent in August 2024, down from 12.6 percent in June 2024, while core inflation fell to 11.9 percent from 14.1 percent over the same period.
The SBP added that the external sector showed improvement, with elevated workers' remittances and stronger export earnings helping to contain the current account deficit to 0.2 billion in July 2024.
The bank noted that FBR tax collection grew by 20.5 percent during July to August 2024, but the pace needs to accelerate to meet the annual revenue target.
Emphasizing the importance of planned foreign exchange inflows to reduce the government's reliance on domestic banks and create room for private-sector lending, the bank expected a pickup in private-sector credit growth as financial conditions ease.
