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Glossary · PSX term

Policy rate.

The policy rate is the benchmark interest rate set by the State Bank of Pakistan.

Definition

By raising or cutting the policy rate, the SBP influences borrowing costs across the economy, including KIBOR, loan rates, and bond yields. Higher rates can cool inflation but tend to slow growth and can pressure equities.

Worked example

If the SBP raises the policy rate to fight inflation, banks may earn more while highly leveraged companies face higher costs.

Related on PSX Clarity

Term
KIBOR
Term
Inflation
Term
State Bank of Pakistan (SBP)
Term
Interest-rate sensitivity

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