Pakistan's Central Bank Cuts Policy Rate

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Pakistan's central bank on Tuesday decided to lower its policy rate by 50 basis points to 12.5% as overall level of risk and uncertainty in the economy increased considerably given the present law and order situation. This was the third cut in interest rate this year. New rate will be effective from Wednesday.

In a statement, the State Bank of Pakistan said as a result of the current political situation in the country, the pressure on the fiscal position, especially from the financing side, has escalated and growth in the real economy is limited. "Striking a balance between monetary and financial stability and real economic activity has become increasingly difficult," the central bank said.

Pakistan's inflation has fallen to 8.9% in October from 10.1% in September. The central bank expects inflation to remain in the vicinity of 11% by the end of current fiscal year.

In August, Moody's Investors Service had raised the outlook for Pakistan's B3 foreign and local currency sovereign bond ratings to stable from negative. The upgrade was led by an increase in International Monetary Fund's loan to Pakistan by $3.2 billion to more than $ 11 billion. In November last year, IMF agreed to give $7.6 billion to Pakistan after the country suffered terror attacks and higher commodity prices.

Pakistan's central bank on Tuesday decided to lower its policy rate by 50 basis points to 12.5% as overall level of risk and uncertainty in the economy increased considerably given the present law and order situation. This was the third cut in interest rate this year. New rate will be effective from Wednesday. (Market News Provided by RTTNews)