Further cut in key policy rate being anticipated

RECORDER REPORT

KARACHI: The State Bank of Pakistan (SBP) will issue its monetary policy statement on Friday with expectation of further cut in the key policy rate.

According to an SBP announcement, the Monetary Policy Committee (MPC) will meet on Friday (May 15) at the SBP here for consideration of key economic issues to decide about the monetary policy.

The committee had cut the interest rate by 4.25 percent to 9 percent in the last two months to deal with the economic slowdown and to minimize the impact of the coronavirus on economic growth. The MPC had reduced the interest rate by 75 bps from 13.25 percent to 12.50 percent during a meeting on March 17. Just after a week on March 24, the MPC called an emergency meeting in the wake of the evolving economic impact of the coronavirus and decided to cut the policy rate by 150 bps to 11 percent.

A third reduction of 200 bps in the key policy rate was announced by the MPC at yet another emergency meeting held on April 16 to support the economy.

Cumulatively, the MPC has cut the policy rate by 425 bps from 13.25 percent to 9 percent during the last two months to address the economic slowdown.

Analysts are expecting a further cut in the key policy rate as the inflation outlook is positive and economic growth needed some more support.

As per some estimates, Pakistan’s economy is expected to contract by -1.5 percent in the FY20 due to COVID-19.