Pakistan's central bank slashes policy rate by 50 basis points to 10.5 %

Islamabad, Dec 15 (PTI) In a surprise move, Pakistan's central bank on Monday slashed the policy rate by 50 basis points to 10.5 per cent.

The State Bank of Pakistan (SBP) announced the interest rate cut after its policy review.

“Monetary Policy Committee has decided to decrease the policy rate by 50 basis points to 10.5 per cent w.e.f. December 16, 2025,” the bank announced in a post on X.

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

The reduction came as a surprise to analysts who were not expecting any change in the policy rate, as the International Monetary Fund (IMF) had advised maintaining tight liquidity to curb expected inflation, despite mounting industry pressure.

Topline Securities wrote in an X post that the slashed policy rate was a “surprise”, as they expected the rates to remain unchanged.

“In the last four monetary policy meetings, (the) SBP observed (the) status quo. (The) last cut of 100bps was announced in (a) May 5, 2025 meeting,” the post read.

In a second review released on Thursday by the IMF, it 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.

Pakistan is heavily dependent on the IMF, which recently released about USD 1.3 billion under two separate facilities currently being offered to Pakistan. PTI SH  ZH ZH