SBP Slashes Interest Rate by 2.5%, Helping Boost in Economic Activity

Islamabad, November 4, 2024—The SBP slashes interest rate by 2.5%, equivalent to a 250-basis-point reduction in the benchmark rate bringing it down to 15%. This significant rate cut announced during today’s Monetary Policy Committee (MPC) meeting, aims to stimulate economic activity by making borrowing more affordable for businesses and households. This brings the interest rate down, marking a substantial easing step amid cooling inflation.
SBP Cuts Interest Rate by 2.5%
SBP Slashes Interest Rate by 2.5%: Key Reasons and Contributing Factors
With inflation showing signs of easing in recent months, the SBP indicated that conditions were favorable for a rate cut. “The rate reduction is intended to support domestic demand and encourage growth at a time when global economic pressures are impacting local industries,” an SBP spokesperson stated.
This substantial rate cut is anticipated to benefit various sectors, including housing, manufacturing, and small and medium enterprises (SMEs), as they look to expand in a more affordable lending environment. The SBP emphasized that this move aligns with its goal of fostering economic stability while supporting recovery. Many analysts were already expecting a 2% rate cut in November 2024 MPC
Financial analysts are optimistic, predicting that the rate cut could also lead to a rally in the Pakistan Stock Exchange and increase investor confidence in the near term. However, some caution remains regarding potential inflationary risks if the economy accelerates faster than expected.
The SBP reaffirmed its readiness to monitor economic indicators closely and adjust the policy rate as needed, balancing economic growth with price stability in the coming months.
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