THE market did not anticipate it. And only a handful of analysts thought the State Bank would slash borrowing costs — that too by 50bps at the most. The majority assumed that the escalation in border tensions with India would keep the central bank from cutting its key policy rate. They believed that mounting tensions between the two nuclear rivals could potentially underpin inflation risks, strain Pakistan’s budget, impair the country’s access to external financing and weigh on growth. Moody’s, one of the top three global rating agencies, also highlighted these risks to the economy amid the growing tensions. In a note released hours after the announcement of a rate cut of 100bps by the bank to 11pc, Moody’s stated:........

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