The State Bank of Pakistan (SBP) in a meeting of its monetary policy committee (MPC) decided to cut down the country’s policy from 100 points to seven per cent. This makes it the fifth time the central bank has reduced the interest rate in the last 100 days.
This decision was taken due to the increase in inflation causing economic downslide and a high risk of growth based on the statement released by the SBP.
This is the fifth rate cut since the coronavirus pandemic affected the global economy making the total reduction of 625 basis points.
The committee noticed that risks to the global economy are highly altered due to the downside and the recovery remaining questionable. The statement reads “The MPC also noted that in this update of the World Economic Outlook (WEO) the IMF has reduced it 2020 global grown forecast further to -4.9 per cent making it 1.9 per cent lower than in April and anticipating a more continuous recovery than previously anticipated.”
The MPC further observed that the economy is expected to recover gradually in the next fiscal year as the lockdown is relaxed. The statement added, “However the recovery will depend mainly on the evolution of the pandemic both in Pakistan and abroad.”
The committee also noticed that there had been an increasing take-up of SBP actions in recent weeks such as concessional refinancing facilities to protect employment and support the health sector and regulatory measure to provide debt servicing reliefs.
The statement also said, “Together this strong and data-driven financial policy response should support employment and growth while keeping inflations expectations anchored and maintained financial stability.”
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