SBP keeps policy rate unchanged at 7pc for 2 months

KARACHI : Announcing the monetary policy decision in Karachi Monday, State Bank of Pakistan (SBP) Governor Dr Reza Baqir said interest rate has not been changed. The decision taken by the SBP Monetary Policy Committee (MPC) was largely in line with market expectations, as the policy remains an effective tool available with the central bank to control inflation. Addressing a press conference in Karachi on Monday, the SBP governor said that the Monetary Policy Board has decided to maintain interest rates. He said that things are much better now than in June, with exports, remittances and the manufacturing sector is performing better. The MPC noted that compared to the time of the last meeting in June 2020, business confidence and the outlook for growth have improved. This reflects the decline in Covid-19 cases in Pakistan and the easing of lockdowns, as well as the timely stimulus provided by the Government and SBP.

At the same time, the forecast for inflation has risen slightly, primarily due to recent supply side shocks to food prices. Average inflation is now expected to fall within the previously announced range of 7 – 9 percent during FY21, rather than marginally below. The MPC noted that financial conditions continue to be accommodative with real interest rates remaining slightly below zero on a forward-looking basis. In addition, the series of targeted measures undertaken by SBP since the Covid-19 outbreak have injected significant liquidity and further lowered funding costs for many businesses and households. Together, these monetary measures have injected an estimated stimulus of Rs. 1.58 trillion, or about 3.8 percent of GDP, in the cash flow of businesses and households. In addition, the government has undertaken a number of significant measures to support economic activity including the Ehsaas emergency cash program, commodity financing, a risk-sharing facility for SMEs, and acceleration of tax refunds. = DNA

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