This is the fourth time in three months that the SBP has slashed the policy rate. In explaining its rationale for cutting the policy rate, the SBP noted that the coronavirus pandemic had created ‘unique’ challenges for a monetary policy due to its non-economic origin. As part of the International Monetary Fund’s (IMF) loan agreement, Pakistan has been given strict instructions to maintain positive real interest rates (nominal interest rate minus inflation rate). The rapidly decreasing inflation rate has given the SBP wiggle room to decrease the policy rate. Of those that believed that a cut was likely, one said by up to 150 basis points, seven said by up to or exactly 100 basis points, two said by 75 basis points, and four said by 50 basis points.

Source: Pakistan Today May 15, 2020 17:37 UTC