ANL 22.45 Decreased By ▼ -0.65 (-2.81%)
ASC 15.96 Decreased By ▼ -0.14 (-0.87%)
ASL 22.40 Increased By ▲ 0.15 (0.67%)
BOP 8.40 Decreased By ▼ -0.15 (-1.75%)
BYCO 8.80 Decreased By ▼ -0.16 (-1.79%)
FCCL 17.91 Decreased By ▼ -0.16 (-0.89%)
FFBL 24.95 Increased By ▲ 0.50 (2.04%)
FFL 17.32 Decreased By ▼ -0.58 (-3.24%)
FNEL 8.23 Decreased By ▼ -0.17 (-2.02%)
GGGL 21.43 Decreased By ▼ -0.66 (-2.99%)
GGL 41.20 Decreased By ▼ -1.98 (-4.59%)
HUMNL 7.05 Increased By ▲ 0.03 (0.43%)
JSCL 20.35 Decreased By ▼ -0.50 (-2.4%)
KAPCO 37.96 Increased By ▲ 0.06 (0.16%)
KEL 3.55 Decreased By ▼ -0.06 (-1.66%)
MDTL 2.99 Decreased By ▼ -0.01 (-0.33%)
MLCF 36.67 Increased By ▲ 0.37 (1.02%)
NETSOL 151.40 Decreased By ▼ -1.90 (-1.24%)
PACE 5.85 Decreased By ▼ -0.13 (-2.17%)
PAEL 31.10 Decreased By ▼ -0.10 (-0.32%)
PIBTL 9.31 Decreased By ▼ -0.05 (-0.53%)
POWER 7.91 Increased By ▲ 0.01 (0.13%)
PRL 20.25 Decreased By ▼ -0.60 (-2.88%)
PTC 10.34 Decreased By ▼ -0.06 (-0.58%)
SILK 1.71 Increased By ▲ 0.04 (2.4%)
SNGP 44.67 Increased By ▲ 1.48 (3.43%)
TELE 22.20 Increased By ▲ 0.14 (0.63%)
TRG 174.60 Increased By ▲ 1.10 (0.63%)
UNITY 35.60 Decreased By ▼ -0.60 (-1.66%)
WTL 3.18 Decreased By ▼ -0.07 (-2.15%)
BR100 4,961 Decreased By ▼ -18.06 (-0.36%)
BR30 24,423 Decreased By ▼ -37.02 (-0.15%)
KSE100 46,528 Decreased By ▼ -107.87 (-0.23%)
KSE30 18,422 Decreased By ▼ -58.36 (-0.32%)

Pakistan Deaths
Pakistan Cases
4.22% positivity

The world does not come to an end as it may seem from stock market movement or brokers anxiety. A 75-bps cut earlier this week does not mean that more may not come in terms of easing. If one is inclined to read between the lines, the decision of cut is a first step towards more easing in unprecedented times. Expect an emergency meeting for rate cut prior to schedule meeting in May20.

Third point of MPS notes that “the MPC emphasized that it stood ready to take further actions if and when needed as more information becomes available on the outlook for inflation and growth.” Those are not off-the-cuff random remarks. Several small steps are better than a big one, in SBP’s view.

The decision of further actions is to be based on more information to come. Right now, fear and panic are driving global markets. And no rate cut at a time of extreme panic can work. It may be safely said that had the rate cut been 200 bps yesterday, market would have still been in red. It could take more days to fall by 7 percent, but the fall is inevitable. People take time to internalize new realities and rational actions need introspection. Better information leads to better decision making.

Had the SBP cut the rate by 200 bps, precious little ammunition would have been left with the central bank to combat the next wave of panic. The lessons are to be learnt by Fed which has taken the interest rates to zero in US.  This is limiting central bank’s ability to cater to further shock.

Mind you, these shock waves are inevitable. With higher number of reported cases and deaths due to COVID, there will be lower economic activities and there will be more panic. The fear of economic slowdown will further send the markets in a slide. More actions would be warranted.

In order to deal with shocks, therapy is required. Not all the healing can be done in one go. It should be a continuous process and should be targeted. Pakistan’s economic slowdown cannot solely be addressed by mere rate cut, no matter what its extent. More systematic approach is required to heal where it hurts and when it hurts.

There is economy wide slowdown and not all the formal sector is listed in Pakistan, and not all the formal sector is leveraged. The impact on informal economy is large where numerous services are now suffering. In the second wave it is going to impact the manufacturing sector. With better information flow, better decision making can take place.

Inflation is expected to come down significantly with low oil prices and suppressed demand. But there might be some increase in prices of some goods due to supply disruption or excess demand. The situation would become clearer with each passing week.

SBP must be vigilant and should have regular meetings with banks and big corporates to come up with right policy actions to minimize the economic impact of the mayhem. Reducing interest rate is one; and the easing spree will continue.


Comments are closed.