State Bank of Pakistan’s MPC Set to Decide on Interest Rate Cut
Current Rate at 19.5% with Inflation at 9.6%
The State Bank of Pakistan’s Monetary Policy Committee (MPC) will convene tomorrow to assess the country’s monetary policy, with strong expectations for a notable reduction in interest rates following appeals from various sectors.
Currently, the interest rate stands at 19.5%, while inflation for August was recorded at 9.6%, resulting in a real interest rate of 10%. This significant gap has led to widespread calls for a substantial rate cut, with industry leaders advocating for a reduction of up to 500 basis points to stimulate economic growth.
Financial analysts, however, anticipate a more cautious decrease, projecting a cut of between 150 to 200 basis points. The MPC’s forthcoming decision is particularly critical, coming after previous reductions totaling 2.5 percentage points over recent months.
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Despite inflation peaking at 38% earlier this year, recent declines have given the government a chance to boost liquidity in the private sector.
Experts argue that reducing borrowing costs could stimulate investment and economic activity, which is crucial for job creation, especially for young people. The growth rate for the current fiscal year is anticipated to increase to 3.5%, up from 2.4% in FY24.
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