State Bank of Pakistan Announces New Monetary Policy, Keeps Interest Rate at 12%
The State Bank of Pakistan (SBP) has announced its new monetary policy for the next two months, deciding to keep the interest rate steady at 12%.
According to the Monetary Policy Committee (MPC), inflation remained lower than expected in February 2025. However, rising food and energy prices could contribute to inflationary pressures. The SBP noted that economic activity continues to grow, but rising imports have increased pressure on the current account. The committee believes that maintaining the current interest rate is necessary for economic stability.
Economic Challenges and Outlook
The central bank reported that in January 2025, Pakistan’s current account deficit widened to $400 million due to increasing loan repayments, leading to a decline in foreign exchange reserves. Additionally, large-scale manufacturing output has decreased, while global economic uncertainty has increased due to rising tariffs on the international front.
The Monetary Policy Committee (MPC) further highlighted that global economic growth, trade, and commodity prices could be affected in the coming months. Central banks worldwide have slowed down their rate-cutting cycles, emphasizing the need for a cautious monetary policy to keep inflation within 7.5%.
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GDP Growth & Previous Rate Cuts
The SBP also revealed that Pakistan’s real GDP growth rate for FY 2025 stood at 2.5%.
It is worth noting that the SBP had previously reduced the interest rate six consecutive times, cutting it by a total of 10%. This is now the seventh time the central bank has decided to keep the interest rate unchanged.
This decision reflects the SBP’s commitment to maintaining economic stability while keeping a close watch on inflation, global market trends, and domestic economic growth.
