The State Bank of Pakistan (SBP) will issue a Monetary Policy Statement with status quo expectations for the next two months on 21st September.
The SBP’s Monetary Policy Committee (MPC) will meet at SBP Karachi the same day to review the economic indicators and decide on the monetary policy for the next two months. After the meeting, State Bank of Pakistan Governor Dr. Reza Baqir will announce the decision at a press conference.
Most economists and analysts expect the Monetary Policy Committee in the upcoming meeting to hold the interest rate unchanged at 7 percent as the SBP has made a substantial reduction in the key interest rate since March to address the impact of the Covid-19 pandemic.
During the March-June period, the SBP committee rapidly cut the policy rate to 625 basis points to help the economy. The scheduled meeting of the Monetary Policy Committee in July was therefore postponed, as the Committee assumed that a range of steps had already been taken to resolve the economic challenges.
COVID-19’s negative effect on the economy forced the MPC to revisit monetary policy and the committee on March 24, 2020 in an evolving meeting, just after a week of scheduled meeting, reduced the main policy rate by another 150 bps to 11%. The MPC assumed that this cumulative easing, while protecting inflation expectations, would buffer the growth slowdown.
During a meeting on 25 June 2020, the MPC reduced the policy rate by 100 bps to 7% to tackle the risks to domestic economic development. The final cut brings the cumulative reduction in the policy rate to 625 bps since mid-March.
Analysts at Arif Habib Limited said this rate cut decision was well backed by economic fundamentals, such as inflation, which slid from 10.24 percent in March to a single digit in the months ahead. Inflation has remained range-bound since then, hovering between 8-9% on year-on-year basis.
