ISLAMABAD, Dec. 15 (Xinhua) -- The State Bank of Pakistan (SBP) on Monday announced a 50 basis points (bps) cut in its key policy rate, lowering it to 10.5 percent, citing stable inflation and improving economic activity.
The move takes the cumulative policy rate reduction since June 2024 to 1,150 bps, when the rate stood at the peak of 22 percent. The policy rate had remained unchanged for four consecutive meetings before Monday's decision.
The central bank said average inflation remained within the target range of 5 to 7 percent during July-November of fiscal year 2025-26, though core inflation remains relatively sticky. The inflation outlook remains broadly unchanged, supported by benign global commodity prices and anchored inflation expectations.
The central bank said economic activity continues to gain traction, reflected in improvements in key indicators, including stronger-than-expected growth in large-scale manufacturing. However, it cautioned that the global environment remains challenging, particularly for exports.
On the external front, the SBP said the current account deficit remained broadly in line with expectations, while foreign exchange reserves rose above 15.8 billion U.S. dollars, supported by official inflows, including a 1.2-billion-dollar disbursement from the International Monetary Fund following the completion of program reviews.
The bank said the real policy rate remains adequately positive to help stabilize inflation within the target range over the medium term, while creating space to support sustainable economic growth. ■