Economy's interest rate reduced to 6.50 percent

18th September 2015

 
 

The State Bank of Pakistan (SBP) has reduced the economy’s interest rate to 6.50 percent – a historic low in the country since the last 42 years. In its monetary policy announcement on 12th September, 2015, SBP Governor announced the 50 basis point cut from the existing rate of 7 percent. He further announced that the SBP target rate will be set at 6 percent.

The reduction in interest rates will further have a positive impact on private and consumer sector credit – the earning ability of the banking sector from risk-free government paper has been greatly constricted with constant reductions. This would coax them into switching their focus to the private sector and increase their advances to the consumer segment too. However, savings rates, linked with the economy’s discount rate, will also be reduced by 0.5 percent – bringing them down to a minimum level of 4 percent.

 

 
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