Pakistan's central bank lowered its policy rate for the second time in a week as the number people infected by the coronavirus has risen considerably, prompting social distancing and reduced activity, which it said was expected to lead to a "noticeable" slowdown in domestic demand.
The State Bank of Pakistan (SBP) cut its key rate by a further 150 basis points to 11.0 percent, bringing the total easing since the cut on March 17 to 225 points.
"The MPC was of the view that this cumulative easing would cushion the growth slowdown while protecting inflation expectations," SBP said, referring to the decision by its monetary policy committee at an emergency meeting.
This month's rate cuts come after the central bank paused in its tightening campaign in July 2019 following 9 rate hikes to curb inflation from a fall in its rupee.
Since July last year SBP had kept its rate steady until the spread of the virus began to affect demand and it cut the rate by 75 basis points on March 17. At that point, SBP said it was ready to take further action when more information became available.
Overt the last week, the spread of the virus, Covid-19, has caused major disruptions to the global economy and trade, with the International Monetary Fund slashing its 2020 growth forecast to below zero from 3.3 percent.
This implies the outlook for growth and inflation is likely to be revised down further, SBP said, adding it "remains ready to take whatever further actions become necessary in response to the evolving economic impact of the Coronavirus."
SBP said it would soon announce further regulatory measures with banks to address the pressure on borrowers' cash flows from disruptions by making deferment and loan restructuring easier.
The State Bank of Pakistan issued the following statement:
"1. At its last meeting on 17th March 2020, the Monetary Policy Committee (MPC) noted considerable uncertainty about how the Coronavirus outbreak would impact the global economy and Pakistan.
In the statement issued following that meeting, the MPC “emphasized that it stood ready to take further actions if and when needed as more information becomes available on the outlook for inflation and growth.”
2. Substantial new information on global and domestic developments has become available since the last MPC meeting.
Globally, the Coronavirus has severely increased in reach. This has caused major disruptions to economic activity and the IMF has also significantly downgraded its global growth outlook for 2020 from 3.3 percent growth previously to below zero. These global developments have also led to a sharp fall in international trade.
On the domestic front, since the last MPC, the number of COVID-19 cases has increased considerably, prompting social distancing and curtailment of activity. This is expected to lead to noticeable slowdown in domestic demand.
3. The developments discussed above imply that the outlook for growth and inflation in Pakistan is likely to be revised down further.
In the wake of this new information, the MPC agreed at its emergency meeting today, to take further action.
Accordingly, the MPC has decided to cut the policy rate by a further 150 basis points to 11 percent. This brings the cumulative easing over the past one week to 225 basis points.
The MPC was of the view that this cumulative easing would cushion the growth slowdown while protecting inflation expectations.
4. 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. The announcement of these measures is expected soon and will complement the action being taken by the MPC on interest rates today.
5. The MPC remains ready to take whatever further actions become necessary in response to the evolving economic impact of the Coronavirus."
www.CentralBankNews.info
0 comments:
Post a Comment