Following a reduction in key policy rate, the State Bank of Pakistan (SBP) on Saturday revised overnight repo and reserve repo rate. According to DMMD Circular No 07 of 2016, the SBP has decided to reduce its 'Policy Rate' (Target Rate) from 6.00 percent to 5.75 percent. The SBP Overnight Reverse Repo (Ceiling) rate will be at 6.25 percent, ie, 50 bps above the SBP policy rate.

The SBP Overnight Repo (Floor) rate will be 4.25 percent, ie, 150 bps below the SBP policy rate. Accordingly, the floor and ceiling levels for the interest rate corridor are 4.25 percent and 6.25 percent p.a. respectively, showing a width of 200 bps. The SBP will ensure that the money market overnight repo rate remains close to the SBP policy rate (Target Rate). According to SBP, these changes are effective from 23rd May 2016. While, all other instructions on the subject shall, however, remain unchanged.

Copyright Business Recorder, 2016