Risky slope

THE latest reduction of 200bps in the State Bank’s policy rate appears moderate in the backdrop of calls from business groups for a bigger cut of 3pc to 5pc. With inflation plunging to 4.9pc last month, many expected a more ‘dovish’ monetary policy to bridge the gap between the latest inflation readings and real positive rates. The fall in the three-month benchmark Kibor — a reference interest rate banks use to decide the price at which they lend money — to around 12pc in response to the fresh inflation data had also reinforced these expectations. What makes the SBP stand apart from the market trends and continue what some still see as a restrictive policy stance, despite the rate cuts of 9pc to 13pc in just six months? It is multiple risks that inflation remains susceptible to.