Pakistan central bank holds key rate at 10.5%
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KARACHI, Pakistan, Jan 26 : Pakistan's central bank held its key policy rate unchanged at 10.50 per cent on Monday, the central bank chief said, defying market expectations for further easing following a surprise reduction in December.
The decision follows a surprise 50-basis-point cut in December that ended a four-meeting pause, and comes after cumulative easing of 1,150 basis points since mid-2024. Interest rates had previously peaked at a record 22 per cent in 2023.
The move, announced by central bank chief Jameel Ahmad at a press conference, ran counter to market expectations. A Reuters poll conducted ahead of the meeting had anticipated a 50-basis-point cut, citing easing inflation, stronger foreign exchange reserves and a stabilising rupee.
Pakistan's consumer price inflation slowed to 5.6 per cent year-on-year in December, while prices fell on a monthly basis due to lower perishable food costs, official data showed. Non-food inflation, however, remained elevated in both urban and rural areas.
An International Monetary Fund staff report has cautioned against premature monetary easing under Pakistan’s $7 billion loan programme, urging policymakers to remain data-dependent to anchor inflation expectations and rebuild external buffers.
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