Home / Brokerage / Discount rate cut by 150bps to 12% owing to lower inflation witnessed in 1QFY12 – Alfalah Securities Limited

Discount rate cut by 150bps to 12% owing to lower inflation witnessed in 1QFY12 – Alfalah Securities Limited

Karachi: The State Bank of Pakistan (SBP) has reduced the discount rate by 150 bps to 12% for Oct-Nov from previously 13.5%, primarily due to a lower inflation witnessed in 1QFY12.

According to Alfalah Securities, the State Bank claimed that a reduction in discount rate by 50bps for July 2011 showed a positive impact on the economy while, a reduction in CPI inflation was also observed which gave room to the Central Bank to cut the discount rate significantly in an attempt to bring investment growth and support private sector credit. However, there are concerns over the external front due to falling foreign reserves despite of consistent worker’s remittances inflows. Furthermore, an intensive energy crisis along with prevailing law and order situation in the country can also result negatively for the overall growth of the economy and there is a chance that the government would fall short of meeting its GDP target of 4.2% for FY12.

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