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Following a reduction in the key policy rate, State Bank of Pakistan Saturday announced a cut in overnight reverse repo and overnight repo rate by 50 basis points (bps). According to a DMMD Circular No 16 of 2015 issued on September 12, 2015, SBP has decided to cut its policy rate (target rate) from 6.50 percent to 6.00 percent.
Accordingly, the SBP overnight reverse repo (ceiling) rate will be at 6.50 percent, ie, 50 bps above the SBP policy rate, down from 7 percent. Similarly, with a decline of 50 bps the SBP overnight repo (floor) rate will be at 4.50 percent, ie, 150 bps below the SBP policy rate. Accordingly, the floor and ceiling levels for the interest rate corridor are 4.50 percent and 6.50 percent p.a, respectively showing a width of 200bps, it added.
The SBP said that these changes will be effective from 14th September 2015 and it (SBP) will ensure that the money market overnight repo rate remains close to the SBP policy rate (target rate). All other instructions on the subject shall, however, remain unchanged, the central bank said.

Copyright Business Recorder, 2015

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