ISLAMABAD – The State Bank of Pakistan (SBP) on Monday announced a 50 basis point reduction in its policy rate, bringing it down to 10.5 per cent. This marks the first rate cut since May, when the benchmark rate was last reduced and subsequently held at 11 per cent.
Read More: SBP likely to hold interest rate at 11% amid inflation risks
The move comes amid falling inflation, with headline inflation dipping to 3 per cent earlier this year. November’s inflation was recorded at 6.1 per cent, slightly lower than October’s 6.2 per cent, signaling relative stability in consumer prices.
The International Monetary Fund (IMF) had previously advised Pakistan to maintain tight liquidity to curb potential inflationary pressures. In its second review released last Thursday, the Fund emphasized that monetary policy should remain “appropriately tight and data-dependent” to anchor inflation expectations.
Contrary to market expectations, the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) decided to reduce the policy rate by 50 basis points (bps) to 10.5% on Monday.
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— Business Recorder (@brecordernews) December 15, 2025
📢 Monetary Policy Committee has decided to decrease the policy rate by 50 basis points to 10.5 percent w.e.f. December 16, 2025.#SBPMonetaryPolicy
— SBP (@StateBank_Pak) December 15, 2025
The IMF noted that the SBP cautious approach, maintaining positive real interest rates, had been pivotal in reducing inflation while supporting the rebuilding of the country’s external financial buffers. It stressed that price stability should remain a key priority despite pressure for monetary easing.
Industrial leaders in Pakistan had called for a reduction in interest rates, arguing that high borrowing costs were affecting competitiveness in global markets. They hope the latest cut will provide relief to industries, support investment, and help stimulate economic growth.
The SBP’s decision reflects a balancing act between containing inflation and addressing economic pressures on businesses. By easing the policy rate while monitoring data closely, the central bank aims to maintain macroeconomic stability while supporting industrial recovery.
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Economists expect that the move could also positively impact borrowing costs for consumers and businesses, potentially boosting credit growth and investment activity in the coming months.
The central bank will continue to assess inflationary trends and global economic conditions to determine future policy adjustments.