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Monetary Policy: SBP slashes interest rate by 100bps

ISLAMABAD: The State Bank of Pakistan (SBP) has announced the monetary policy for next two months today, decreasing the key interest rate by 1 per cent to 8.5, ARY News reported.

The decision was taken by the Central Board of Directors of SBP at its meeting held under the chairmanship of Governor SBP Ashraf Mahmood Wathra in Karachi.

According to press release issued by SBP, it has decided to reduce the policy rate by 100 basis points from 9.5 percent to 8.5 percent effective from 26th January 2015.

Addressing the press conference, Ashraf Mahmood Wathra said some of the key macroeconomic indicators had improved further since the last Monetary Policy decision of November 2014. “CPI inflation and its expectations continue to follow a downward trajectory. In the last two months of November and December 2014, trade deficit has declined, though it has increased in H1-FY15 when compared to H1-FY14. Moreover, considerable foreign exchange inflows have contributed in maintaining an upward trajectory in foreign exchange reserves.”

The monetary policy rate is the rate at which commercial banks are allowed to borrow from the central bank’s discount window. The central bank uses this tool to control money supply in the economy.

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