The State Bank of Pakistan (SBP) on Monday slashed its policy rate by 50 bps to 10.5 per cent.

The last reduction in the policy rate came in May. Since then, the benchmark rate has been held at 11 per cent, even as headline inflation dipped to 3pc earlier this year. November inflation was recorded at 6.1pc, compared to 6.2pc in October.

The International Monetary Fund (IMF) had advised maintaining tight liquidity to curb expected inflation, despite mounting industry pressure.

In a second review released on Thursday, the Fund said the monetary policy needed to remain “appropriately tight and data-dependent” to keep expectations anchored, while noting that the SBP had maintained positive real interest rates on a forward-looking basis.

It said the tight stance had been pivotal in reducing inflation and should be maintained to ensure price stability and support the rebuilding of external buffers.

Industrial leaders had previously called for a reduction in interest rates to help them stay competitive globally.

More to follow