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SBP announces monetary policy
The State Bank of Pakistan announced its monetary policy Monday, stating that the discount rate will remain unchanged...
The discount rate remains unchanged at 12.5 per cent for the next two months.
KARACHI: The State Bank of Pakistan announced its monetary policy Monday, stating that the discount rate will remain unchanged at 12.5 per cent for the next two months.
Stakeholders in the economy had already expected SBP to keep its rate unchanged because of the resurgent inflation. Consumer prices rose unexpectedly by over 13 per cent year-on-year in April, 2010, making a cut in rates less likely.
On the other side, the stock market and financial institutions showed less activity, anticipating the rate to remain unchanged, resulting in market liquidity remaining tight.
SBP says that although the external account deficit has improved, foreign investment has been declining. The central bank has been reviewing monetary policy every two months since September last year.
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This is a correct decision in view of persistence of inflation. The SBP deserves to be commended for keeping a steady hand.Recommend
Meekal, keeping interest rates steady or reducing them is totally opposite of what should be prescribed in a climate of high inflation. Like it or not, raising interest rates is the only way to stave off inflation.
http://www.economicsuk.com/blog/000065.html
The only reason one can think in this case is to keep interest rates steady or cut them is to push more liquidity into the system (and counter a liquidity crunch as a result of the economic situation). However, if a climate of high inflation continues, the SBP will have no choice but to hike up interest rates (as was done a year ago).
Honestly, we need a real economist for a State Bank Governor (such as Dr. Ishrat or Dr Shamsad Akhter) and not a banker (no matter how suave he may be or how many Hermes ties he may own).Recommend
What recommendations State Bank has made to the federal government to lower the inflation rate in the country?Recommend
Inflation is the result of mismanagement of the Govt and due to the hoarding of different commodities, interest rate doesn’t have any thing to do with inflation in Pakistan. Govt have to keep a tight control on commodity market and prices of every commodity. Hike in petrol price and electricity tarrif are also the reasons for inflation. interest rate can’t control inflation.Recommend