SBP policy rate likely to remain unchanged

The benchmark interest rate for the next two months which is to be decided by the State Bank of Pakistan (SBP) in a meeting tomorrow is likely to remain unchanged as the country navigates its way through slow economic activity and inflation against a backdrop of rising second wave coronavirus infections.

In a report by Express Tribune, Pakistan has invited the International Monetary Fund (IMF) to complete its second review of the country’s economy under the $6 billion loan programme, which has been on hold since the Covid-19 outbreak in Pakistan in February. The Fund has asked Islamabad to meet loan conditions including a hike in power tariff, additional measures for increase in tax collection and making the central bank autonomous.

Keeping this in view, experts have stated that the central bank’s monetary policy committee (MPC) is expected to leave the policy rate unchanged at 7 per cent to let economic activities pick up pace despite high inflation and spike in Covid-19 cases.

Earlier, the central bank slashed the policy rate by a cumulative 625 basis points in five revisions between March and June 2020 to support economic activities and help businesses and individuals stave off default on bank loans.

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At present, the real interest rate (the benchmark interest rate minus inflation reading) is around 1pc negative.

 

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