Pakistan cuts interest rates to 42-year low

[RazorMC]

Our economy is doing better because of low fuel-import costs. There is no magic involved. If the prices go up, we'll be back in Zardari's stone-age.

 

[Viper0011.]

Banks are still giving loans at 14 to 18 pc.

Kis ko faida ho rha hai ???

Banks are private institutions, they have to follow the central bank in terms of regulation and having oversight, but they don't have to loan out on exact terms and rate. The central bank lowers the rates for other banks to borrow from her. Other banks will also go down in rates, but it won't be precisely cent by cent compared to the central bank. The interest rate reduction is for inter-market borrowing.

Like for example, in the US, the Fed has the interest rate at 0% for the past few years. But commercial borrowing is from 7-9% (depending upon business's credit worthiness, years in business, risk and all). Similarly, people with great credit, will get home mortgage loans at 3.8-4.5%. But people with higher credit risk will start to get into 5, 6, and even 9% depending upon the credit worthiness, history, income and risk calculations.

So expect your local banks to come down a point or even two, but they won't do down to a level that the Central Bank can go to.

 

[Faiez]

in the US, the Fed has the interest rate at 0% for the past few years.

You can't have 0% interest rates. It's actually 0.25%. You can't sell treasuries at face value. They set a target rate range and keep rate in the range.