Monetary Easing Cycle

Monetary Policy in Brief

Since the eruption of Covid-19 Pandemic, Monetary Policy Committee (MPC) of SBP has reduced the policy rate in a short span of time reducing the burden of forthcoming interest payments on businesses and households considerably.

The MPC reduced the policy rate by a cumulative 625 basis points from 13.25 percent to 7 percent in a short span of time from mid-March to June 2020. This is one of the largest reduction in the policy rate among the emerging economies during Pandemic. The major factors prompting aggressive reduction in the policy rate was a sharp fall in inflation and continued economic slowdown. During the challenging times, the focus of monetary policy shifted toward supporting growth and employment. Recently, in its meeting held on 21st September 2020, the MPC decided to keep the policy rate unchanged at 7.0 percent. Taking note of the improved outlook for growth and rising inflation, MPC is of the view that current monetary policy stance is appropriate to support the emerging recovery, while keeping inflation expectations well-anchored and maintaining financial stability.


In response to falling inflation and domestic demand, SBP has proactively eased monetary policy to support growth and employment


Pakistan has undertaken one of the fastest and largest policy rate cut among the selected emerging markets

  • Prompt monetary policy response to contain the economic impact of COVID-19. 
  • The sharpest reduction in policy rate during a short span of time, four months.
  • One of the largest reduction in the policy rate among the emerging economies which will help stimulate economic activity.

Recent Monetary Easing Cycle in Historical Context


Policy Stance

Time Span (months)

Cumulative Change in Policy Rate*

5 Jan 2000 - 7 Jun 2001



300 bps

19 Jul 2001 - 18 Nov 2002



- 650 bps

11 April, 2005 - 13 Nov 2008



750 bps

21 Apr 2009 – 25 Nov 2009



-250 bps

2 Aug 2010 - 30 Nov 2010



150 bps

1 Aug 2011 - 24 Jun 2013



-500 bps

16 Sep 2013 - 18 Nov 2013



100 bps

17 Nov 2014 - 23 May 2016



-375 bps

28 Jan 2018 - 17 Jul 2019



750 bps

18 Mar 2020 - 25 Jun 2020



-625 bps

 Source: SBP
* Before 2015 the discount rate (SBP reverse repo/ceiling) rate was used to communicate monetary policy stance


Reduction in Policy Target Rate since the beginning of Covid-19 Pandemic

25 June 2020
Policy rate cut, 100 bps  

The decision reflected the MPC's view that the inflation outlook has improved further, while the domestic economic slowdown continues and downside risks to growth have increased. Against this backdrop of receding demand-side inflation risks, the priority of monetary policy has appropriately shifted toward supporting growth and employment during these challenging times.

15 May 2020
Policy rate cut, 100 bps

The MPC’s decision reflected that the inflation outlook improved further in light of the recent cut in domestic fuel prices. As a result, inflation could fall closer to the lower end of the previously announced ranges of 11-12 percent this fiscal year and 7-9 percent next fiscal year.

16 April 2020
Policy rate cut, 200 bps

The MPC was of the view that this action would cushion the impact of the Coronavirus shock on growth and employment, including by easing borrowing costs and the debt service burden of households and firms, while also maintaining financial stability.

24 March 2020
Policy rate cut, 150 bps

The MPC was of the view that this cumulative easing would cushion the growth slowdown while protecting inflation expectations. The MPC also noted that SBP is in the process of taking necessary regulatory measures in coordination with banks to address pressures on cash flows of borrowers affected by Coronavirus related disruptions through facilitating deferment and restructuring of their loans.

17 March 2020
Policy rate cut, 75 bps 

The decision reflected the MPC’s view that the outlook for inflation has improved in light of the recent deceleration in domestic food prices, significant decline in consumer price expectations, sharp fall in global oil prices, and slowdown in external and domestic demand due to the Coronavirus pandemic.