ISLAMABAD: The State Bank of Pakistan (SBP) has opted to keep its key policy rate unchanged at 22 per cent for the seventh consecutive policy meeting. The decision was announced following a session of the bank’s Monetary Policy Committee (MPC).
In a released statement, the MPC stressed the importance of maintaining the current monetary policy stance, which includes significant positive real interest rates, in order to achieve the target inflation range of 5-7pc by September 2025.
Citing reasons for their decision, the MPC highlighted global economic factors such as stabilised commodity prices amidst resilient global growth and recent geopolitical events adding uncertainty to future outlooks. Additionally, upcoming budgetary measures may impact near-term inflation.
Although the MPC acknowledged a high level of inflation, it noted a downward trajectory, with inflation significantly moderating in the latter half of the fiscal year. March saw headline inflation decline to 20.7pc year on year from 23.1pc in February, and core inflation dropped notably to 15.7pc from 18.1pc in February.
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Attributing this favorable outcome to tight monetary and fiscal policies, as well as other factors like lower global commodity prices and improved food supplies, the MPC expressed satisfaction with the macroeconomic stabilization measures. Economic activity, particularly in the agriculture sector, has shown moderate recovery, while a sizable surplus in the current account in March 2024 stabilised foreign exchange reserves despite debt repayments and weak financial inflows.
The MPC’s decision aligns with similar cautious policy stances adopted by leading central banks globally, particularly in advanced economies, due to recent disinflation trends.
The committee deemed it prudent to maintain the policy rate unchanged, citing susceptibility to risks including global oil price volatility, stabilisation of commodity prices, potential inflationary impacts of resolving circular debt in the energy sector, and tax rate-driven fiscal consolidation.
This decision follows last month’s maintenance of the policy rate at 22pc for the sixth consecutive meeting and precedes the nearing completion of Pakistan’s $3 billion standby arrangement secured from the International Monetary Fund (IMF) last year.
