KARACHI (Dunya News) – The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) on Monday revised down the policy rate by 250 basis points to 15 percent, effective from Nov 5, 2024.
The committee noted that inflation has declined faster than expected and has reached close to its medium-term target range in October.
The committee assessed that the tight monetary policy stance continues to play an important role in sustaining the downward trend in inflation.
Moreover, a sharp decline in food inflation, favourable global oil prices and absence of expected adjustments in gas tariffs and PDL rates have accelerated the pace of disinflation in recent months.
Taking into account the inherent risks associated with these factors, the MPC assessed that the near-term inflation may remain volatile before stabilizing within the target range.
The committed noted that various developments put a positive impact on the macroeconomic outlook of the country, leading to significant cut in policy rate.
It said the approval granted by the International Monetary Fund’s Board for Extended Fund Facility program reduced uncertainty in the country and improved the prospects for realization of planned external inflows.
It highlighted that the surveys conducted in October showed an improvement in confidence and a reduction in inflation expectations of both consumers and businesses.
“Third, the secondary market yields on government securities and KIBOR have declined substantially. Fourth, tax collection during the first four months of FY25 fell short of target. Lastly, while the global oil prices have exhibited significant volatility amidst escalating geopolitical tensions, prices of metals and agricultural products have increased notably,” read the press release.
Considering these developments, MPC viewed the current monetary policy stance as appropriate to achieve the objective of price stability on a durable basis by maintaining inflation within the 5-7 percent target range.
The central bank said that the developments will also support macroeconomic stability and help achieve economic growth on a sustainable basis.