SBP Cut the Interest Rate by 100bps To Make it To 11%

The State Bank of Pakistan cut the interest rate by 100 bps, and now the interest rate is officially 11%. The State Bank of Pakistan today announced a cut in the interest rate of 100 bps, which was 12% recently, and now it is at 11%. The experts gave a mixed reaction to this, as there is too much uncertainty over this, and they said nothing can be predicted, as United States tariffs and India's false blame on Pakistan have an effect on the global market as well as the local market. Experts like Top Line Security give mixed reactions, saying that the 100 bps has caught the market off guard, as people were anticipating maximum 50bps cut.

The market and experts think that businesses, corporations, and industries played a major role in today's rate cut, as it was not expected that the SBP of Pakistan would cut the rate in today's meeting. There are many reasons not to cut the rate as of now, and there are fewer reasons to cut the rate; however, SBP stakeholders voted for a rate cut via voting, and the rate was cut by 100 bps. Moreover, the State Bank of Pakistan said that lower inflation is the major reason to cut the rate and said that the reduction in electricity prices also played a major role in today's rate cut. 

Experts are warning that the SBP should now be cautious, as this could impact the IMF program as well as lead to another unwanted current account deficit, as Pakistan still has not resolved the elephant in the room, which is dependency on import-led growth. Whenever there is a push for growth, Pakistan always suffers because of high import figures, which result in a high current account deficit, and then Pakistan's economy gets overheated. Additionally, Pakistan has to go back to the stability phase. This has been a repeated cycle for Pakistan since 2007, and it is hoped that the State Bank of Pakistan does not breach the strict IMF monetary policy for Pakistan.