Since the eruption of Covid-19 Pandemic, Monetary Policy Committee (MPC) of SBP has reduced the policy rate in a short span of time reducing the burden of forthcoming interest payments on businesses and households considerably.
The MPC reduced the policy rate by a cumulative 625 basis points from 13.25 percent to 7 percent in a short span of time from mid-March to June 2020. This is one of the largest reduction in the policy rate among the emerging economies during Pandemic. The major factors prompting aggressive reduction in the policy rate was a sharp fall in inflation and continued economic slowdown. During the challenging times, the focus of monetary policy shifted toward supporting growth and employment. Recently, in its meeting held on 21st September 2020, the MPC decided to keep the policy rate unchanged at 7.0 percent. Taking note of the improved outlook for growth and rising inflation, MPC is of the view that current monetary policy stance is appropriate to support the emerging recovery, while keeping inflation expectations well-anchored and maintaining financial stability.
|
Period | Policy Stance | Time Span (months) | Cumulative Change in Policy Rate* |
|---|---|---|---|
| 5 Jan 2000 - 7 Jun 2001 | Tightening | 17 | 300 bps |
| 19 Jul 2001 - 18 Nov 2002 | Easing | 16 | - 650 bps |
| 11 April, 2005 - 13 Nov 2008 | Tightening |
44 | 750 bps |
| 21 Apr 2009 – 25 Nov 2009 | Easing | 7 | -250 bps |
| 2 Aug 2010 - 30 Nov 2010 | Tightening |
4 | 150 bps |
| 1 Aug 2011 - 24 Jun 2013 | Easing |
23 | -500 bps |
| 16 Sep 2013 - 18 Nov 2013 | Tightening | 2 | 100 bps |
| 17 Nov 2014 - 23 May 2016 | Easing | 18 | -375 bps |
| 28 Jan 2018 - 17 Jul 2019 | Tightening | 18 | 750 bps |
| 18 Mar 2020 - 25 Jun 2020 | Easing | 3 | -625 bps |
25 June 2020
Policy rate cut, 100 bps
The decision reflected the MPC's view that the inflation outlook has improved further, while the domestic economic slowdown continues and downside risks to growth have increased. Against this backdrop of receding demand-side inflation risks, the priority of monetary policy has appropriately shifted toward supporting growth and employment during these challenging times.
15 May 2020
Policy rate cut, 100 bps
The MPC’s decision reflected that the inflation outlook improved further in light of the recent cut in domestic fuel prices. As a result, inflation could fall closer to the lower end of the previously announced ranges of 11-12 percent this fiscal year and 7-9 percent next fiscal year.
16 April 2020
Policy rate cut, 200 bps
The MPC was of the view that this action would cushion the impact of the Coronavirus shock on growth and employment, including by easing borrowing costs and the debt service burden of households and firms, while also maintaining financial stability.
24 March 2020
Policy rate cut, 150 bps
The MPC was of the view that this cumulative easing would cushion the growth slowdown while protecting inflation expectations. The MPC also noted that SBP is in the process of taking necessary regulatory measures in coordination with banks to address pressures on cash flows of borrowers affected by Coronavirus related disruptions through facilitating deferment and restructuring of their loans.
17 March 2020
Policy rate cut, 75 bps
The decision reflected the MPC’s view that the outlook for inflation has improved in light of the recent deceleration in domestic food prices, significant decline in consumer price expectations, sharp fall in global oil prices, and slowdown in external and domestic demand due to the Coronavirus pandemic.
SHARE THIS PAGE!