The State Bank of Pakistan (SBP) is likely to cut the policy rate owing to sharp decline in inflation, which has shrunk to single digit, after a gap of 22 months, sources said. The central bank is going to review the monetary policy for the two months (November-December 2009) on November 24, 2009. Sources said that declining trend in inflation has provided a passage for the cut in the policy rate.
Although sources in banking industry were not sure about exact reduction, they were confident that SBP would cut the interest rate and it would be by 50-100 basis points (bps). For the first time the central board of directors of SBP would take final decision on policy rate on the recommendations of an independent nine-member Monetary Policy Committee (MPC).
MPC committee would review the impact of tight monetary policy, inflation statistics, monetary aggregates and other inflationary tools, besides overall economic situation to submit its recommendations to SBP board for final approval. In view of sharp decline in the inflation, trade and current account deficit and rising trend in the forex reserves, bankers and economists are expecting a cut of 50-100 bps in policy rate presently stood at 13 percent. Inflation has eased from record high of 25 percent in October 2008 to single digit 8.87 percent in October 2009 after a gape of 22 months.
Comments
Comments are closed.