The State Bank of Pakistan announced another rate cut in it's monetary policy meeting on Thursday. This is the 5th time that the rate has been reduced since the onset of the Coronavirus disease. Today's announcement has brought a total reduction of 625 bps since mid-March.

The MPC also noted that the economy is expected to recover in the coming fiscal year as lock-downs are eased. The rate cut was taken on the back of lower inflation figures. The press release stated that the rate cut will counter demand-side inflation risks.

Inflation has gradually ticked down largely due to the heavy decrease in global oil prices and subsequent rate cuts by OGRA. The statement also praised the positive effects of having a flexible exchange rate and stated that it has played the role of a 'shock absorber'.

"Real rates on a forward-looking basis (defined as the policy rate less expected inflation) would be kept close to zero, which is appropriate under the current circumstances" was also included in the statement.