Breaking News: Market to celebrate 100bps cut in Monetary Policy
SBP: Given the recent macroeconomic developments, the Central Board of Directors has decided to reduce the SBP policy rate by 100 basis points from 9.5 percent to 8.5 percent effective from 26th January 2015.
The key macroeconomic indicators have improved further since the last monetary policy decision of November 2014. CPI inflation and its expectations continue to follow a downward trajectory. In the last two months of November and December 2014 trade deficit has declined, though it has increased in H1-FY15 when compared to H1-FY14. Moreover, considerable foreign exchange inflows have contributed in maintaining an upward trajectory in foreign exchange reserves.
Containment of fiscal deficit thus far is also encouraging and bodes well for the credibility of consistent and coherent policies of the government and for the continuation of official and private capital inflows. With these positive developments, first half of the current fiscal year ended on a better macroeconomic outlook for the remaining months of FY15.
Amid improving macroeconomic conditions, business sentiments are likely to strengthen. Availability of cheap raw material, low input cost, and healthy construction activity, as indicated by higher cement sale and steel production, are expected to benefit commodity producing sector.
In addition to this, as a result of recent redistribution of oil price decrease related income from producer to consumer, demand and thus production of consumer durables may increase. On the other hand, with limited impact of floods on rice and sugarcane crops and with incentives for Rabi crops in place, the prospects for a better agriculture sector performance in this fiscal year is high. In this backdrop, the real GDP is therefore expected to maintain the growth momentum achieved in the last year into FY15 as well.
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