- Pakistan Rupee (PKR) trends lower, SBP keeps rates at 7%
- SBP gave upbeat outlook
- US Dollar (USD) rises on safe haven flows
- Fed Powell & Steve Mnuchin to testify before Congress
The US Dollar Pakistan Rupee (USD/PKR) exchange rate is trading higher on Tuesday. The pair settled -0.08% on Monday at 165.16. At 09:30 UTC, USD/PKR trades +0.5% at 166.05, slightly off the high of the day at 166.40.
The State Bank of Pakistan Monetary Policy Committee has decided to keep interest rates unchanged at 7%. This was broadly expected. The central bank considers that the current monetary policy stance is appropriately supporting the economic recovery following the coronavirus economic hit.
The SBP raised its forecasts for inflation slightly, owing to the recent supply side shock. Inflation is now expected to fall between 7% – 9%in the 2021 fiscal year. The Central Bank Governor Dr Reza Baqir also gave an upbeat outlook saying that the country’s economy was gradually improving and that most economic indicators were moving in the right direction. Although he also confirmed that the coronavirus pandemic badly impacted economic growth as it did in other countries.
Dr Baquir stated that the economic outlook is now dependant on the covid outbreak and the world economy. Should coronavirus cases decline, and global economies improve, the Pakistan economy could grow signififcsntly.
According to the Monetary Statement, Large scale manufacturing (LSM) returned to growth in July, a sign that the economy is starting to pick up
The US Dollar is pushing higher versus almost all its peers as investors continue to seek out its safe haven properties.
Attention now turns to Federal Chair Jerome Powell & US Treasury Steven Mnuchin who are expected to testify before Congress and the Senate today. Both Powell and Mnuchin are expected to add pressure to US lawmakers to agree on additional US fiscal stimulus.
The Republicans and Democrats have failed to agree on an additional rescue package since the $600 additional unemployment benefit expired in July. The lack of additional stimulus is adding to the risk off mood ion the market, lifting the US Dollar.