Karachi: The State Bank of Pakistan (SBP) announced a reduction in its Policy Rate by 100 basis points to 12%, marking the sixth consecutive rate cut in a sustained monetary easing effort. The decision is primarily driven by declining inflation and aims to support economic recovery by fostering a more favorable lending environment.

According to a statement by JS Global, the cumulative reduction in the Policy Rate now stands at 1,000 basis points from its peak of 22%. This ongoing easing cycle reflects the central bank's confidence in the improving economic indicators and strengthening external sector sustainability.

In a post-monetary policy briefing, the SBP Governor highlighted the improvements in key economic indicators. The governor noted that foreign exchange reserves have seen a year-on-year increase, although recent weeks witnessed a decline due to debt repayments.

The central bank's foreign exchange reserves are projected to reach approximately $13 billion by June 2025, buoyed by strong remittances and improved export performance. These factors, along with favorable international commodity prices, are expected to maintain the current account deficit between a surplus and a deficit of 0.5% of GDP in the fiscal year 2025.