The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) has decided, in its convened session today, to maintain the policy rate at 22 percent.
This marks the fourth consecutive meeting where the MPC has kept this stance unchanged. The decision aligns with market expectations, with the majority of participants anticipating the retention of the current rate.
In the Monetary Policy Statement, released by the central bank, acknowledgment is made of the recent surge in gas prices during November, surpassing the MPC’s initial projections, which could potentially impact inflation.
Despite the impact of elevated gas prices, the Committee recognizes counteracting factors, such as the recent decline in international oil prices and improved availability of agricultural produce.
Upon evaluating the situation, the Committee emphasizes that the real interest rate remains positive from a forward-looking 12-month perspective, expecting a downward trajectory in inflation.
Noteworthy developments since the October meeting include the successful conclusion of the staff-level agreement for the first review under the IMF SBA program, anticipated to unlock financial inflows and enhance SBP’s foreign exchange reserves.
Furthermore, the Q1-FY24 GDP growth aligns with the MPC’s expectations of a moderate economic recovery.
Recent consumer and business confidence surveys also depict an improvement in sentiment. However, the Committee remains cautious as core inflation persists at an elevated level, displaying a gradual decline.
Considering these factors, the Committee assesses that the present monetary policy stance is appropriate for achieving the inflation target of 5-7 per cent by the end of FY25.
The Committee reiterates that this assessment is contingent on sustained targeted fiscal consolidation and the timely realization of planned external inflows.
