SBP Announces New Monetary Policy for the next two months

In its bi-monthly monetary policy today, the State Bank of Pakistan (SBP) has kept the interest rate unchanged at 7 percent for the next two months.

According to the details, in today’s meeting of the Monetary Policy Committee (MPC), it has been decided to maintain the interest rate at 7 percent for the next 2 months. The decision comes as the country is reeling from the effects of the COVID-19 pandemic.

The MPC noted that since the last meeting in September, the domestic recovery has gradually gained traction, in line with expectations for growth of slightly above 2 percent in Fiscal Year 2021 (FY21), and business sentiment has improved further. Nevertheless, there are risks to the outlook.

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The recent rise in COVID cases in Pakistan and many other countries presents considerable downside risks. On the upside, while it could take some time to fully implement worldwide, there has been recent encouraging news on vaccine development. On the inflation front, recent out-turns have been on the higher side, primarily due to increases in food prices.

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However, these supply-side pressures are likely to be temporary and average inflation is expected to fall within the previously announced range of 7-9 percent for FY21. Taken together, risks to the outlook for both growth and inflation appear balanced.

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It may be mentioned here that the SBP kept the policy rate unchanged at 7 per cent at its last review meeting held in September whereas the central bank has reduced interest rates by 625 basis points to 7pc in the easing cycle from March to June 2020 in response to the coronavirus pandemic and with a view to supporting the economic growth.

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