SBP maintains interest rate at 22pc for sixth time in a row
Business
Central Bank keeps policy rate unchanged at 22pc
KARACHI (Dunya News) – The State Bank of Pakistan (SBP) on Monday kept the policy rate unchanged at 22 per cent for sixth time in a row.
The central bank took the decision as inflation stood at around 23.1% in February. The inflation rate in January was 28.3%.
On the other hand, some analysts think a monetary policy announcement in April may see some rate cuts as inflation may come around 20-21 percent in March.
“At its meeting today, the Monetary Policy Committee (MPC) decided to keep the policy rate unchanged at 22 percent. In approaching today’s decision, the Committee noted that inflation, in line with earlier expectations, has begun to decline noticeably from H2-FY24. The Committee, however, observed that despite the sharp deceleration in February, the level of inflation remains high and its outlook is susceptible to risks amidst elevated inflation expectations.
“This warrants a cautious approach and requires continuity of the current monetary stance to bring inflation down to the target range of 5 – 7 percent by September 2025. The Committee reiterated that this assessment is also contingent upon continued targeted fiscal consolidation and timely realization of planned external inflows,” said a press release issued by the SBP.
The release further said the MPC noted a few key developments since its last meeting, which have implications for the macroeconomic outlook. First, the latest data continues to depict moderate pick-up in economic activity, led by rebound in agriculture output. Second, the external current account balance is turning out better than anticipated and has helped maintain FX buffers despite weak financial inflows. Third, while inflation expectations of businesses have shown a steady increase since December, those for consumers have also inched up in March.
“Lastly, on the global front, while the broader trend in commodity prices remained benign, oil prices have increased; partly reflecting the continued tense situation in the Red Sea. Moreover, amidst uncertainty regarding the inflation outlook, key central banks in both advanced and emerging economies have continued to maintain a cautious monetary policy stance in recent meetings,” said the statement.
