The SBP kept the interest rate unchanged at 7%

The SBP kept the interest rate unchanged at 7%

KarachiState Bank of Pakistan (SBP) has not changed the benchmark interest rate by 7% for the next two months.

The decision taken by the SBP Monetary Policy Committee (MPC) was largely in line with market expectations, as the policy is an effective means for the central bank to control inflation.

Addressing a press conference on Monday, SBP Governor Raza Baqir said, “On the risk of rising inflation in the short term … no change in interest rates.”

He said that this reflects the reduction in Code 19 cases in Pakistan and the ease of lockdown as well as the timely stimulus provided by the government and the SBP. Meanwhile, the inflation forecast has risen slightly, mainly due to recent supply shocks to food prices, “the bank said.

The SBP said the average inflation for FY21 is expected to fall to 7-9 per cent.

The press release further states that the steps taken by the SBP during the epidemic have significantly reduced “significant liquidity and further financing” for businesses and households.

Together, he said, these fiscal measures have triggered an estimated Rs. 500 crore. 1.58 trillion in business and household cash flows, or about 3.3% of GDP.

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