State Bank announces interest rate for the next 2 months. The State Bank of Pakistan (SBP) kept the interest rate unchanged at 7% for the next two months. The decision taken by the SBP Monetary Policy Committee (MPC) was largely in line with market expectations, as the policy remains an effective tool available with the central bank to control inflation.

“The interest rate is left unchanged…on the threat of uptick in inflation in short term,” said State Bank Governor Raza Baqir addressing a press conference. SBP kept its projection for average inflation for the full year FY21. Economic activities are gradually improving. SBP anticipates economic growth at 2% in FY21.

The central bank sets its policy rate according to the inflationary trend. A high inflation reading requires an increase in the policy rate to make borrowing costly and low inflation leads to a reduction in the policy rate to incite business expansion.

Earlier, the Covid-19-induced lockdown in the country and across the globe proposed the central bank to cut the policy rate by a significant 625 basis points in a period of four months from March to 7% in June 2020.