Islamabad, Sep 12 (PTI) Pakistan's central bank Thursday announced that it will cut the policy rate by 200 basis points (bps) to 17.5 per cent from 19.5 per cent amid a reduction in inflation.

The State Bank of Pakistan (SBP) made the announcement in a statement after a meeting of its Monetary Policy Committee (MPC), which makes periodic adjustments in the interest rates.

Also Read | SpaceX Polaris Dawn Astronauts Create History by Conducting First-Ever 'All Civilian' Spacewalk.

"The Monetary Policy Committee (MPC) decided to reduce the policy rate by 200 bps to 17.5 per cent in its meeting today,” a statement released by the SBP read.

It added that the committee took into “account various factors impacting the inflation outlook”.

Also Read | Vladimir Putin Hails India's Rising Success Under PM Narendra Modi As NSA Ajit Doval Briefs Russian President on Ukraine Visit (Watch Videos).

The MPC “assessed the real interest rate to still be adequately positive to bring inflation down to the medium-term target” of 5 to 7 per cent and help ensure macroeconomic stability, according to the statement.

The committee also noted that oil prices had fallen sharply and the SBP's foreign reserves stood at $9.5 billion on Sept 6.

“Third, secondary market yields of government securities have declined noticeably since the last MPC meeting,” it said, adding that “inflation expectations and confidence of businesses have improved in the latest pulse surveys, while those of consumers have worsened slightly”.

The decision on reduction had been keenly awaited after inflation in August was recorded at 9.6 per cent, a substantial improvement in terms of prices of essential commodities. The MPC noted that the decline in August “reflected the impact of contained demand, reinforced by improved supplies of major food items”.

The SBP in recent months began to bring down interest rates from 22 per cent by two successive cuts of 1.5 and 1 per cent.

The reduction will help the industrial sector to borrow from banks at more reasonable rates and increase industrial output, which is essential to meet the 3.5 per cent annual growth target set by the government for fiscal 2024-25.

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)