Discount rate may remain unchanged: Monetary Policy today

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SBP Diary - SBP News

KARACHI : The State Bank of Pakistan (SBP) will release the Monetary Policy Statement (MPS) on Monday, with expectations of no change in key policy rate, owing to persisting inflationary pressure on the economy. The central bank s board is going to meet erly in the day at SBP head office in Karachi to review the monetary policy for the next two months.

Economists expect that the central bank would continue its tight monetary policy stance and would retain its key policy rate unchanged due to increase in the inflation during last five months.Year-on-year basis, the country s headline increased by 13.26 percent during April after easing in previous months. The inflation was in single digit in November 2010, and SBP was expecting it in the vicinity of 11 percent by the end of current fiscal year.However, inflation is once again rising on domestic front, mainly due to increase in oil prices, and it is even higher than SBP expectations. Besides, the government budgetary borrowing is constantly increasing due to high fiscal deficit and it missed the IMF target of budgetary borrowing for March-end. The upward trend in inflation has given no room to the central bank for cut in key policy rate; therefore, it is likely that the SBP would maintain interest rate at 12.5 percent for the next two months, economists said.They said that the economy has already indicated about some risks like inflation, prevailing security situation in the country, and fiscal uncertainties. Now, at this stage, when the inflationary pressure is gradually increasing again on domestic front and government budgetary borrowing is also increasing gradually, further cut in the key policy rate would directly hit the economic growth, economists said.

Courtesy: Business Recorder

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