SBP keeps policy rate unchanged at 22% amid economic developments

WEB DESK: In its convened session today, the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) has resolved to maintain the policy rate at 22 per cent, marking the fourth consecutive meeting where this stance remains unchanged.

This decision aligns with prevailing market anticipations, as the majority of market participants were in agreement regarding the decision to maintain the current rate.

The Monetary Policy Statement, released by the central bank, acknowledges the recent surge in gas prices during November, which surpassed the MPC’s initial projections, potentially influencing inflation.

Despite the impact of elevated gas prices, the Committee recognised counteracting factors, including the recent decline in international oil prices and the improved availability of agricultural produce.

Evaluating the situation, the Committee emphasised that the real interest rate remains positive from a forward-looking 12-month perspective, with an expectation of a downward trajectory in inflation.

The MPC took note of significant developments since its October meeting.

Firstly, the successful conclusion of the staff-level agreement for the first review under the IMF SBA programme is anticipated to unlock financial inflows and enhance the SBP’s foreign exchange reserves.

Secondly, the Q1-FY24 GDP growth aligns with the MPC’s expectations of a moderate economic recovery.

Additionally, recent consumer and business confidence surveys 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 assessed that the present monetary policy stance is apt 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 realisation of planned external inflows.

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