SBP Cuts Interest Rate By 100 Basis Points

Karachi (Business Reporter): Finance Indepth on May 3 predicted decline of 100 basis to 150 basis points in the interest rate very soon. State Bank on May 15 announced 100 basis cut in the key interest rate. New interest rate is being set at 8%.

In a statement, SBP attributed two key factors for the readjustment of monetary policy. (Read Monetary policy Statement Here)

“First, the government has significantly reduced petrol and diesel prices by 30-40 percent in response to the continued fall in global oil prices, which has improved the outlook for inflation,” SBP stated in a press release. “Second, most countries, including Pakistan, have begun easing lockdowns, which should help provide support to economic activity.”
SBP Stated: “Nevertheless, as elsewhere, the situation remains highly uncertain. A possible rise in infections could prompt fresh lockdowns, and the recovery could prove more sluggish than is currently being anticipated. Third, due to timely policy actions and international assistance, the initial volatility observed in domestic financial and foreign exchange markets has somewhat subsided in recent weeks, although global financial conditions
remain considerably tighter than before the coronavirus outbreak. Recent supportive developments have helped to restore the SBP’s foreign reserves position to close to pre-coronavirus levels of over US$ 12 billion.”

Finance Indepth (FI) reported on May 3, that State Bank is expected to reduce interest rate by 100 basis points to 150 basis points. This decision was expected due to sharp decline in the petrol prices. (Interest Rate Cut)

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