SPB says no policy rate cut in July

Analysts say future inflation expectations and SBPs need to maintain positive real interest rates may signal that easing measures have reached their peak

KARACHI: The State Bank of Pakistan (SBP) on Friday decided to skip the meeting of the Monetary Policy Committee (MPC) for July which means policy rates will remain at the same level of 7 per cent as before. 

The central bank announced that the next MPC meeting will be held in September 2020.

“Given the number of MPC meetings that have taken place in recent months, and actions taken in those meetings, the MPC does not consider it necessary to hold the regular meeting of July 2020,” read the statement.

The central bank said that the MPC will continue to observe economic conditions and stand ready to take whatever further actions may become necessary in response to any adverse impact on the economy because of the pandemic or any other factor.

This year the SBP has cut policy rates from 13.25 per cent to 7 per cent. The pace of policy rate cuts in Pakistan has been one of the fastest in the world.

While the SBP had the option to hold a meeting and announce status quo policy rates, the decision to skip the July 2020 meeting suggests that the SBP does not want to give out the signal that the easing spree has come to an end.

Analysts, however, feel that keeping in mind future inflation expectations and SBPs need to maintain positive real interest rates, the easing measures taken by the central bank have reached their peak. 

Moreover, according to analysts,  considering the weakening of the rupee against the US dollar, the fundamentals do not support a rate cut.

Furthermore, considering Pakistan’s history with relatively higher policy rates, further easing, if undertaken will be slowpaced.




- Advertisement -
Ariba Shahid
Ariba Shahid
The author is a business journalist at Profit. She can be reached at [email protected] or at twitter.com/AribaShahid
- Advertisement -

Must Read