ISLAMABAD - The State Bank of Pakistan would consider reducing key interest rate on Tuesday after inflation had gone down by over two percent in last month (February).

The Monetary Policy Committee of SBP will meet on Tuesday at SBP Karachi to decide about Monetary Policy. Economic experts and officials in ministry of finance are of the view that SBP may reduce the interest rate in the upcoming monetary policy after inflation had showed declined in February.

Headline national Consumer Price Index (CPI) eased to 12.4 percent in February 2020 as compared to January when inflation index had jumped to the nine-year high of 14.6 percent.

The federal government and SBP are facing criticism due to higher interest rate of 13.25 percent, which was kept from last several months. Governor SBP Reza Baqir had recently informed the Public Accounts Committee (PAC) that the central bank may consider slashing the policy rate following a decline in inflation. He said that there are speculations that as headline inflation has come down from 14.6 percent in January to 12.4 percent in February 2020, the SBP may review the policy rate in the next monetary policy committee meeting.

Meanwhile, the meeting of the Monetary and Fiscal Policies Coordination Board (MFPCB) is also expected to meet next week. The last MFPCB was held six months ago on August 28, 2019. The board headed by the Adviser to Prime Minister on Finance Abdul Hafeez Shaikh would review the economic conditions, growth strategy as well as policy rate. The governor SBP would also attend the meeting.

 

The MFPCB was postponed twice in last few weeks. Earlier, the MFPCB meeting was postponed due to engagements of Adviser to PM on Finance Dr Abdul Hafeez Shaikh because of US Secretary of Commerce’s visit but this time Governor State Bank of Pakistan (SBP) Dr Reza Baqir made a request to adviser’s office for postponing the MFPCB meeting due to his engagements. After this request, this scheduled meeting was postponed for the second time.

 

Finance Ministry would inform the Board about the fiscal side, revenue and current account deficit. The Board would deliberate upon the measures to reduce the current account deficit as well as measures to generate revenue and propose measures to meet fiscal requirements. Ministry of Commerce would apprise the Board about the current trade figures, exports and imports and measures to reduce the trade deficit. The Board would be informed about the measures taken to increase exports and the outcome so far as well as future line of action.

The business community is continuously demanding of the government to reduce the interest rate to boost the economic activities in the country.  A delegation of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) had met with PM Imran in January this year and sought urgent relief to save the industries. The industrialists placed three main demands before the prime minister – cut peak high interest rate, reduce energy prices and withdraw the CNIC condition on purchase of over Rs 50,000.

down by 2 percent