SBP Target Rate steady at 6.5 percent

KARACHI: Pakistan’s central bank held its benchmark interest rate steady at 6.5 percent on Saturday, as policy-makers grappled with the recent floods in the country that could lead to inflationary pressures on food pricing. The State Bank of Pakistan (SBP) left the recently introduced SBP Target Rate (also called Policy Rate) on hold for the July-August period. Policy-makers did not make any changes to the interest rate corridor and kept the reverse repo rate unchanged at 7 percent.
It also kept the discount rate at 7 percent.
Pakistan’s consumer inflation was more muted than expected during the last fiscal year. The average consumer price index (CPI) inflation came down to 4.5 percent in the last fiscal year from 8.6 percent in fiscal 2014. The low inflationary trend allowed the central bank to cut the interest rate by an accumulative 300 bps in successive monetary policy announcements from November 2014 onwards.
“There is a possibility of upward revision in the energy tariffs in the fiscal year (2015/16) and an adverse impact of floods on the production of perishable food items, going forward that could have an upward pressure on inflation,” SBP Governor Ashraf Mahmood Wathra told a news conference.