Monetary policy: Continued today, interest rate likely to be maintained

Canada Global (Web News) The State Bank of Pakistan will hold a meeting today to review the progress on the economic front and announce its monetary policy for the next seven weeks.

Mixed movements in economic indicators suggest that the worst is not yet over, but the market has built a consensus that the policy rate will remain at 15 percent for the next month and a half.

However, a significant portion of market participants did not rule out a cut of 25-50 basis points, seeing the inflation rate fall to 23.2 percent in September from a 47-year high of 27.3 percent in the previous month.

More importantly, new finance minister Ishaq Dar, who is sticking to his old prescription of running a controlled economy, would prefer to see an easier monetary policy.

Today is the first meeting of the Monetary Policy Committee (MPC) after State Bank Governor Jameel Ahmed and Dar assumed office.

Interest rates and a flexible rupee-dollar parity are the two major tools available to central banks around the world to control inflation readings and steer economic momentum in their respective countries.

The State Bank has raised rates by a total of 800 basis points to 15% over 11 months (September 2021 to July 2022). The central bank kept the rate unchanged at its previous monetary policy in August 2022.

 

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