SBP cuts interest rate by 100bps to seven percent

ISLAMABAD: The State Bank of Pakistan on Saturday cut the interest rate for the fourth straight time to a 42-year low of 7 percent from 8 percent in a bid to spur economic growth, as inflation in recent months was more muted than expected.
“Given the macroeconomic conditions, the Board of Directors have reduced the policy rate by 100 basis points to 7 percent, which is the lowest rate in the last 42 years,” Ashraf Mahmood Wathra, Governor of the SBP, told a news conference. The policy rate, effective from May 25, is the lowest since August 1973.
The SBP sees macroeconomic conditions towards the end of the current fiscal year further improved as compared to the beginning of the year.
“The current macroeconomic stability achieved through domestic policies and favourable external developments provide an opportunity to focus on the reforms that will put the economy on sustainable growth path,” Wathra said.
He said the reduction in the policy rate will promote the business activities in the country and reduce the input cost.
The low inflationary trend allowed the central bank to cut interest rate in successive monetary policy announcements from November 2014 onwards.