SBP cuts policy rate by 75 bps to 12.50pc
–– announces 3 measures for COVID-19 challenges
KARACHI: The State Bank of Pakistan (SBP) on Tuesday cut its key interest rate by 75 basis points to 12.50 per cent, the first reduction in four years, citing a declining inflationary pressure.
The central bank also announced measures to address the economic and health challenges posed by the spread of coronavirus in the country.
The bank has held the 13.25pc interest rates steady since July when it took a pause from a series of hikes after data started showing the inflation rate stabilising.
However, inflation has lately registered a decline, which the central bank said in a statement was mainly due to the global slowdown following an oil price dip.
Businesses and exporters have lately been protesting the high borrowing costs, which they said were harming investment.
The SBP in a press release noted that the COVID-19 pandemic has precipitated a slowdown in global demand and volatility in world financial markets, as well as a steep fall in oil prices.
"Together with the domestic deceleration in food prices and significant decline in consumer price expectations, the outlook for inflation in Pakistan has therefore improved, paving the way for today’s rate cut," the bank said.
It said the current market volatility being experienced in Pakistan is "externally driven" and the strengthening of the fundamentals of the country's economy that drove the improvement in Pakistani markets before the coronavirus outbreak "remains intact". Predicting that volatility is likely to subside as global risk aversion reduces, the SBP said it "stands ready to take whatever additional actions that may be necessary to safeguard price and financial stability and support economic growth". - Reuters