SBP keeps policy rate unchanged at 21 per cent

Karachi: The State Bank of Pakistan (SBP) has announced that it will maintain the interest rate at 21 per cent for the next two months.

The decision was taken at a meeting of the central bank’s Monetary Policy Committee (MPC) chaired by Jameel Ahmad.

In a statement issued by the central bank, the MPC noted several factors that influenced their decision. The committee assessed that inflation is likely to have peaked in May. This assessment was based on factors such as weak domestic demand, a decrease in inflation expectations among consumers and businesses, a downward trend in global commodity prices, and the high base effect.

The press release highlighted important developments that have occurred since the previous MPC meeting.

Firstly, the provisional national accounts estimates indicated a significant deceleration in real GDP (gross domestic product) growth during FY23.

Secondly, the current account balance has shown consecutive surpluses in March and April 2023, which has somewhat lessened pressure on foreign exchange reserves.

The press release also emphasises that the government unveiled the budget for FY24 on June 9, which envisions a slightly contractionary fiscal stance compared to the revised estimates for FY23.

1/3 At its meeting today, Monetary Policy Committee (MPC) of #SBP decided to maintain the policy rate at 21%.https://t.co/mjQgHmMd3B#SBPMonetaryPolicy pic.twitter.com/4GX5J8AahI

— SBP (@StateBank_Pak) June 12, 2023

Furthermore, the global commodity prices and financial conditions have recently eased and are expected to continue in the near term.

The SBP’s decision to maintain the policy rate at 21 percent reflects its assessment of the current economic situation and its efforts to balance various factors, including inflation, growth, and external stability.