The State Bank of Pakistan’s Monetary Policy Decision: What to Expect
The State Bank’s Monetary Policy Committee (MPC) is set to meet today to announce its decision on the country’s monetary policy, including the key interest rate. The interest rate currently stands at 19.5%, with inflation at 9.6%, resulting in a positive real interest rate of 10%.
Economic stakeholders are eagerly anticipating the decision, with predictions ranging from a modest cut to a more significant reduction to stimulate growth. Financial experts anticipate a reduction of 150 basis points, with some calling for up to 200bps, while industry leaders are advocating for a more dramatic 500bps reduction.
Despite recent cuts, the private sector is demanding further adjustments to boost economic growth. The government’s recent $7 billion IMF loan has added pressure for prudent monetary policy decisions to meet IMF conditions.
Experts believe that a cautious approach may be taken to maintain a buffer against inflation. However, reducing the cost of borrowing is crucial to encourage private sector investment, stimulate economic activity, and foster job creation in Pakistan.
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