SBP to maintain discount rate in Monetary Policy

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SBP to maintain discount rate in Monetary Policy

State Bank of Pakistan is scheduled to announce Monetary Policy today for the next two months where it is expected that Policy Rate/Discount Rate will be maintained at current level.

With the change in CPI Inflation calculation methodology, Average Inflation has fallen to 9.88% leading to Real Interest Rates of almost 4%. This has given much room to SBP to hold on the hawkish stance and observe the trend at least till the next monetary policy.

Moreover, comfort from External Side being derived from a decline in Current Account deficit is one major reason SBP will likely hold the Interest Rate at current levels. Current Account Deficit for July-August 2019 period has significantly declined to $0.6 billion as compared to $2.6 billion in same period last year, marking significant decline.

The market yields also points out towards Interest Rates increase tapering off, as yields have fallen by average 25 bps in the latest T-Bills auction.

With severe criticism from the Business segment and General Public, over the increased cost of doing business and recessionary environment, the Ministry of Finance in General and SBP Governor, in particular, are under pressure.

We at The Mint Pk believes that Pakistan’s economy is eagerly looking for a stimulus as sentiments remain dampened. The recent views of SBP Governor made in past few months points out to the fact that SBP is willing to revive the economy as desired results of past steps have started coming. The first step towards revival will be holding off the Rates in the economy before gradually decreasing them.

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