KARACHI: State Bank of Pakistan (SBP) today (Friday) kept interest rates on hold at 7 percent for the next two months as it sought to balance economic headwinds from the COVID-19 pandemic with the need to curb inflation.
It is the fourth time that the central bank has kept its main policy rate unchanged after cutting it by 625 basis points, down from 13.25pc, at the time the global pandemic hit its economy last February.
The SBP kept the interest rate unchanged to support businesses during the second wave of the Covid-19 pandemic. The monetary policy is an effective tool with the central bank that is used to curb inflation.
The SBP announces a target rate every two months, which serves as the benchmark for overnight funds in the interbank market. The policy rate is revised up or down or kept unchanged in relation to the inflation reading and economic activities. Low inflation leads to a reduction in the policy rate in a bid to ramp up economic activities and vice versa.
