A risky bet

Has the State Bank (SBP) gotten it wrong once again? That’s the question being asked by many as the bank last week decided to keep its benchmark policy rate steady at 15 per cent for a second consecutive meeting to support an economy struggling to contend with an unprecedented liquidity crisis worsened by the recent deadly floods. The reasons are obvious: the central bank’s recent track record during the pre and post-Covid periods doesn’t inspire much confidence when cutting or raising the borrowing costs to boost or tame growth. On both occasions, the bank appeared to have been overtaken by the events others had warned about much in advance. It was slow to start the monetary easing cycle to cut the rate to 7pc from 13.25pc to fight off the likely impact of the pandemic on the economy after resisting calls for proactively reducing the borrowing costs as the pandemic’s impact on the global economy was already becoming evident.