KARACHI, Sept 27: The State Bank said on Thursday the Monetary Policy for next two months (Oct-Nov) would be announced on October 5.

Expectations are high in the market that policy rate could see a further cut since the inflation is in single digit.

The main inflation, Consumer Price Index (CPI) for August on year-on-year basis was 9.1 per cent which was lowest in three years. During FY11 the CPI fell to single digit only for December when it was 9.7 per cent.

Low inflation encourages central banks to allow more liquidity for the system that may spur economic growth.

The State Bank has slashed the policy interest rate by 350 basis points since July 2011 in the wake of gradually declining inflation and a better performance at external front. The current account was surplus in FY11.

Further slash in the policy interest would depend largely on government borrowing policy as it needs huge support from banking money including the central bank.

If the borrowing from State Bank crosses a limit, the inflation would see upward trajectory. It will make more difficult for SBP to introduce a cut in its policy rate.