SBP Monetary Policy Committee
SBP Increased Policy Rate revised by Monetary Policy Committee.
State Bank Monetary Policy Committee meeting held today at 23 May 2022.
The Monetary Policy Committee decides to increase the policy rate by 150 base points.
Earlier to this, the SBP policy rate was 12.25% and now with the rise of 1.5% it will now prevail at 13.75%.
MPC holds its meeting every 6 weeks to decide on the policy rate.
The decision comes in a situation when the dollar has crossed Rs.200 in Pakistan and the economic condition is not so good.
It was hence pertinent to increase the policy rate to cope with inflation.
Effects of SBP Policy Rate
SBP Policy rates have its impacts on Bank loans and bank saving accounts and certificates.
Bank mark-up loans that are booked on a floating mark-up basis will certainly be increased after hiking in the policy rate.
Bank loans mark up are usually floating in nature and absorb the fluctuation in the SBP Policy rates.
The bank loans become costly if the SBP policy rate is increased and vise versa.
The profit paid on bank saving accounts and certificates is also linked with the SBP Policy rate.
If the policy rate is increased then profit paid on saving accounts and certificates for the investors is also increased.
If the policy rates come down then the pay on saving accounts and certificates is also decreased.
The Pakistani economy is now in recession. With the change in Govt, the stock market and forex market is crashed.
The current Govt is instable and causing uncertainty in the market.
The SBP liquid reserves have come down due to imports and loan payments externally in dollars.
The gap in the current account deficit is widened.
In order to stop the dollar outflow Govt has put ban on luxurious imports which are unnecessary right now.
On the other hand Govt need to focus on increasing exports.