They contend that SBP needs to start changing course because real interest rates are currently above 1,000 basis points in the future. Additionally, they argue that rate reductions would lessen the “stress” on corporate borrowers and contribute to a reduction in our rapidly increasing domestic debt obligations. First off, real rates continue to be negative annually despite a faster-than-expected decline in May’s inflation rates because of a high base effect and declining food and fuel prices. The average 11-month CPI inflation rate is still as high as 24.52 percent, down from 29.16 percent a year ago. There is a widespread concern that lowering interest rates will increase imports and deplete our limited foreign exchange reserves, placing pressure on the currency rate and raising inflation.

Source: The Patriot June 06, 2024 04:06 UTC