The State Bank of Pakistan (SBP) has lowered its benchmark interest rate by 100 basis points to 11%. The decision, announced after the Monetary Policy Committee (MPC) meeting on Monday, will take effect from May 6, 2025.

According to the MPC, the rate cut follows a sharp decline in inflation during March and April, driven largely by reduced administered electricity tariffs and easing food prices.

Core inflation also fell in April, aided by a favourable base and moderate demand.

“This cut is higher than market expectations,” Mohammed Sohail, CEO of Topline Securities told a local media outlet adding that analysts had mostly anticipated a 50bps reduction or a hold due to global uncertainties.

Despite the improved inflation trajectory, the MPC acknowledged ongoing global risks, including uncertainty over trade tariffs and geopolitical tensions, and stressed the need to maintain a balanced monetary stance.

Analysts had been divided ahead of the meeting. While Arif Habib Limited expected a 50bps cut citing disinflation and macro stability.

Topline Securities and other economists had predicted no change, pointing to IMF conditionalities and unresolved foreign inflows.

April’s inflation rate stood at 0.3% YoY, significantly lower than March’s 0.7%, while Pakistan’s current account posted a $1.2 billion surplus in March. SBP’s forex reserves slightly increased to $10.21 billion as of April 25.

The policy rate was previously held at 12% in the last MPC meeting.

The rupee has since depreciated by 0.4%, while international oil prices and local petrol rates have edged downward.