KARACHI: The State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC) has decided to keep the policy rate steady at 22% for the next two months following its meeting on Monday.
Chaired by the SBP governor, the committee observed that despite a notable decrease in February, inflation remained high, with ongoing risks to the inflation outlook due to elevated inflation expectations.
The committee emphasized the need for a cautious approach and maintaining the current monetary stance to bring inflation within the target range of 5-7% by September 2025. The SBP’s statement highlighted that achieving this target is subject to continued targeted fiscal consolidation and timely external inflows.
The MPC acknowledged several key developments since its previous meeting that could impact the macroeconomic outlook. Firstly, there has been a modest increase in economic activity, particularly driven by a recovery in agricultural output. Secondly, the external current account balance has performed better than expected, supporting foreign exchange reserves despite weak financial inflows.
Regarding inflation expectations, both business and consumer outlooks have shown a gradual rise, with global oil prices experiencing an uptick due in part to ongoing tensions in the Red Sea region.
Despite global commodity prices remaining stable overall, central banks worldwide have maintained a cautious monetary policy stance amid uncertainties in the inflation outlook.
It is pertinent to mention here that the International Monetary Fund (IMF) had recommended against reducing interest rates, while the business community advocated for a rate cut.
