New developments reported over media speculations of Interest Rates changes from SBP

New developments reported over media speculations of Interest Rates changes from SBP

KARACHI: New developments reported over Interest Rates changes from State Bank of Pakistan.

Amid concerns about the high policy rate and its adverse impact on the economy, the central bank’s current policy rate of 13.25 per cent will likely remain unchanged in a bid to control rising inflation, predict market experts.

Last changed on July 16, 2019, the policy rate was hiked 100 basis points after a strong cycle of monetary tightening contrasting with the global trend toward rate cuts.

As the new monetary policy is set to be rolled out on Monday, market experts predict that the policy rate would remain unaffected due to the upside risks to inflation.

However, the prediction stands in contrast to the claims made by government officials, including President Dr Arif Alvi, who had hinted at a possible decrease in the interest rate owing to a “thriving economy”.

The Pakistani economy has the seventh-highest policy rate in the world, which is well above the world average of 4.67%. In addition, Pakistan is one of the few countries that have gone toward tightening in the span of 12 months. Out of 92 countries that have their own policy rate, only 6 moved towards monetary policy hikes.

This, however, has given Pakistan the opportunity to take advantage of inflows for its T-bills.

Umer Farooq from AKD Securities stated in a report that an upward trend in the prices of the commodities was bound to take place following the rupee devaluation; however, ample supply kept these prices in check.

Keeping this in mind, headline inflation is likely to witness a jump, therefore, pushing the decrease in the policy rate later this year, he added.