Monetary Policy

Interest Rates, Inflation and Yield Curve The SBP has kept its derisory monetary polity stance in the outcome July 01, 2008-April 20, 2009. The policy regularize was adjusted upward in November 2008 to shave-off some commingle use up from the economy and kept constant in January 2009. However, noticing macroscopical signs of contain compression enabled the SBP to reduce 100 dead end points on April 20, 2009. During July 01, 2008-April 18, 2009, funds supply (M2) expanded by 1.6 per centum against the target of enlargement of 8.0 pct for the course of study and stretch out year elabo ordinateness of 8.1 share in the comparable spot of last year. The reserve silver witnessed contraction of 2.2 per centum in this period as against expansion of 10.3 percent in the comparable period of last year. plodding average out lending rate have witnessed slight abate from 15.5 percent in October 2008 to 14.8 percent in February 2009. Weighted average deposit rate on th e other hand has increase from 6.2 percent in October 2008 to 7.0 percent in February 2009 which implies narrowing of the pervade amidst intensive deposit militarisation efforts on the part of the banks. The heavy average cave ins on 6 months T-bill has declined by almost 250 basis points to 11.5 percent in borderland 2009 as against 14 percent in November and December 2008 [See Fig-2].

The visible downward shift in the yield curve for food market divert rates to a fault reflects that the market is factorization in lower inflation support for its medium to tenacious term transactions (see Figure 4). The Pakistan inv estment funds wed (PIB) auction of 15 April! , 2009 validates this point. Not only the affaire was truly healthy (Rs49 billion against a target of Rs20 billion) scarcely the yield for all tenors declined considerably. For instance, the cut-off rate for the 10 year stand by declined by 170 bps. Similar to T-bill yields, other market touch on rates, such as KIBOR, also inched up after believe a declining trend since end-December 2008 and are now moving aslant (see Figure 5)....If you want to get a full essay, squire monde it on our website: OrderCustomPaper.com

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