The State Bank’s Monetary Policy Committee (MPC) said on Thursday that it has reduced its main policy rate by 200 basis points (bps) to 17.5 percent from 19.5 percent, in response to calls for a significant rate decrease.
According to a statement issued by the SBP, “the Monetary Policy Committee (MPC) opted to decrease the policy rate by 200 bps to 17.5 percent in its meeting earlier today,” adding that it took into “account multiple variables impacting the inflation projection.”
Economic stakeholders were keeping a close eye on the interest rate decision, with views ranging from moderate optimism to calls for large reductions.
A considerably higher decrease is being called for by industry and trade partners in order to spur development, even if many financial experts are predicting a moderate drop.
The real interest rate is positive at 10 percent, with the interest rate now at 19.5 percent and the inflation rate in August at 9.6 percent.
Increased requests for a large rate decrease are a result of this large disparity.
Experts in finance often predict a 150 basis point decrease, and some even project a 200 basis point decrease. But in order to promote economic expansion, business leaders are pushing for a more significant 500bps cut.
