Thursday 24 January 2013
A news story titled as “Monetary policy: State Bank cuts benchmark interest rate to 10%” has been published in The Express Tribune dated October 06, 2012. The story provides the information about the reduction of benchmark interest rate from 10.5% to 10% by State Bank of Pakistan. The complete news story can be studied at the following link:
Monetary policy: State Bank cuts benchmark interest rate to 10% – The Express Tribune
Some experts are of the view that this decrease in interest rate will be very beneficial for the economy while others are opposing this new policy of State Bank of Pakistan.
Solution:
I think policy rate is the major instrument in the hands of SBP.Currently the policy rate is high.By maintaing a high policy rate SBP is containing the hyper inflationan.However,its side effect is that higher interest rate decreases growth and investment.There is a trade off.However currently it is more favorable to have higher policy rate.
Monetary policy: State Bank cuts benchmark interest rate to 10% – The Express Tribune
Some experts are of the view that this decrease in interest rate will be very beneficial for the economy while others are opposing this new policy of State Bank of Pakistan.
Solution:
I think policy rate is the major instrument in the hands of SBP.Currently the policy rate is high.By maintaing a high policy rate SBP is containing the hyper inflationan.However,its side effect is that higher interest rate decreases growth and investment.There is a trade off.However currently it is more favorable to have higher policy rate.
