Karachi, Pakistan (BBN)– The State Bank of Pakistan (SBP), the country’s central bank, has formally announced the much-expected reduction of 100 basis points in policy rate that stands at 8.5 per cent for the next two months.
SBP Governor Ashraf Mehmood Wathra announced the revised rate while announcing monetary policy stance in Karachi on Saturday.
The discount rate has reached the lowest level of almost eight years in the central bank’s history as it last stood at 9.0 per cent in 2005 at times when Dr Ishrat Hussain was the SBP governor.
The SBP has also revised downwards its forecast range for average CPI (consumers’ price index) inflation to 4.5-5.5 percent for FY15, well below the annual target of 8.0 per cent.
The SBP chief said that some of the key macroeconomic indicators had improved further since the last monetary policy decision of November 2014. “In the last two months of November and December 2014, inflation declined, trade deficit shrank. Moreover, considerable foreign exchange inflows have contributed in maintaining an upward trajectory in foreign exchange reserves.”
According to the SBP governor, containment of fiscal deficit thus far is also encouraging and bodes well for the credibility of consistent and coherent policies of the government and for the continuation of official and private capital inflows. With these positive developments, first half of the current fiscal year ended on a better macroeconomic outlook for the remaining months of FY15.
BBN/SSR/AD-25Jan15-1:04 pm (BST)
