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Financial Institutions the Monetary Policy Comparison Summary

Autor:   •  March 5, 2015  •  Essay  •  814 Words (4 Pages)  •  610 Views

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Assignment of Financial Institutions 

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Submitted To: Sir Wasif Zafar                                                                                               Lecturer MS Department                                                                                     Topic: Summary of Monetary Policy Statement (Market Interest Rates)                  Submitted By: Naqash Arshad (FA11-BBA-010)

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SUMMARY

Market Interest Rates Statement of (July 2014 and Jan 2015)

The policy rate in the FY 2014 the rate was unchanged and in the FY2015 it is cut by the 50bps for the purpose of the relaxing the inflation pressure. The market sentiments are stable in the FY2014 and in the FY2015 it is improving due to the receipt of the CSF payments and decreasing the oil prices globally and successful review by the IMF also the main factor disbursing 1.1 billion and the SUKUK bonds. Stability of foreign exchange markets are very important so the decisions are made by the statement bank for the stability in the FY 2014. In the FY 2015 the stability cause the forex market under pressured and post the 620.8 million decline in reserves and Pakistan currency PKR depreciated. Due to not confirm to the operations of SBP in FY2014 the state bank borrow the money from the commercial banks to maintain the reserves. In the FY 2015 to avoid the penalty over the policy rate banks bids open market operations. In the FY2014 the rupees liquidity going to more expensive due to that the traders financing increases and in FY 2015 the commercial banks also saw the decline due to the extra financing by the trader. In the 2014 the value of the rupees currency was appreciated due to the monetary policy decision reserves received from the CSF proceeds, Eurobonds, 3G and 4G licences. FY2014 Furthermore this appreciation improved the inflow and both the currencies US and PAK appreciated each other and in FY2015 as concerned the decline in commercial banks inflow the state bank of Pakistan did not meet the target of Net international Reserves. FY 2014 the appreciation of the PAK and the US dollar results in the sustainability in the foreign exchange markets and to reduce the trade deficit. FY 2015 the CPI inflation decrease and that cause the increase in the investment of Pakistan Investment Bond government raised 372.5 billion through auctions. In FY 2014 the way to the stability of the foreign exchange market increase the short term rate in the domestic market and these rates are very closer to the policy rates so, the government rarely accepts the bids on T-bills over the policy rates. FY 2015 to meet the end quarter target of the government borrowing increased SBP liquidity requirements that cause the liquidity shortage. FY 2014 due to increase in the domestic rates, the KIBOR 6 months are stricter and this discourages or have negatively effect on the private investment. FY 2015 the significantly injections in the liquidity that results in the commercial banks to invest more in PIBs. The slightly higher the investment and stable the investment that results in investing the commercial banks in the PIBs. In FY 2015 the cut in the policy rates results in decline the yields 49 to 158 bps. Similarly it occurs in the secondary market. FY 2015 the banks investing in PIBs that result in the lowering the roll over risks for the government. FY 2015 the retail interest rates are expected to decline in FY 2015. In 2014 the auctions of sukuk bonds successful achieve its objective in March 2014 shifting toward the short-term security it enhances the risks towards the banking industry. SBP carefully managing the emerging trends. In FY 2015 the oil prices fall and this occurs due to the decrease in the cost of production FBR cuts the tax on the petroleum products it may increase to borrowings from the commercial banks.

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