Pakistan central bank lowers key policy rate to 11pc

KARACHI: Pakistan’s central bank reduced its key policy rate by 100 basis points to 11 per cent on Monday, resuming a series of cuts that brought the rate down from a record high of 22 per cent after a brief pause in March.

Nine of 14 analysts surveyed by Reuters expected the central bank to cuts its key rate, with three expecting a 50 bps cut and two calling for a 100 bps cut.

The decision came in the backdrop of soaring tensions with neighbouring India following a deadly attack on tourists in Indian Kashmir. The nuclear-armed neighbours have announced a raft of punitive steps that aim to hurt each other economically.

It also comes ahead of an imminent International Monetary Fund (IMF) decision on releasing Islamabad’s next tranche of $1 billion from its $7 billion bailout programme.

The bank had cut the rate by 1,000 basis points since June from an all-time high of 22 per cent before a surprise decision to hold it in March, citing the risk of price rises including from increased US tariffs.

The inflation rate fell to 0.3 per cent in April, its lowest in roughly a decade and below finance ministry estimates of 1.5 per cent to 2 per cent. The central bank forecasts average inflation to be in the range of 5.5 per cent to 7.5 per cent for the fiscal year ending June.

Pakistan’s manufacturing sector growth slowed to a seven-month low in April, with the HBL Pakistan Manufacturing Purchasing Managers’ Index (PMI) easing to 51.9 from 52.7 in March, as concerns over global trade weighed due to the impact of US President Donald Trump’s tariff announcements.

New orders slumped while export orders in particular plummeted. Employment fell for a second month as firms cut costs.

SBP to announce monetary policy today