SBP retains policy rate unchanged at 22%
The MPC noted that this outlook is based on continued fiscal consolidation and timely realization of planned external inflows
The State Bank of Pakistan (SBP) on Monday decided to retain the policy rate unchanged at 22%.
In a statement, the central bank notified: “At its meeting today, the Monetary Policy Committee (MPC) decided to maintain the policy rate at 22 percent.”
The committee noted that headline inflation rose in September 2023 as expected — a major factor in determining the key policy rate.
2/3 The MPC emphasized on continuing with the tight monetary policy stance and reiterated that the real policy rate is significantly positive on forward-looking basis to bring inflation down to 5 – 7 percent by end-FY25.
— SBP (@StateBank_Pak) October 30, 2023
The SBP added it is projected to decline in October and then maintain a downward trajectory, especially in the second half of the fiscal year.
“The committee also noted some offsetting factors: These include the targeted fiscal consolidation in Q1; improvement in market availability of key commodities; and the alignment of interbank and open market exchange rates.”
The MPC noted four key developments since its September meeting —
- The initial estimates for Kharif crops are encouraging and will have positive effects on other key sectors of the economy.
- Second, the current account deficit narrowed considerably in August and September, which helped to stabilize the SBP’s FX reserves position amidst tepid external financing in these two months.
- Fiscal consolidation remained on track, with both fiscal and primary balances improving during Q1-FY24.
- While core inflation remains sticky, inflation expectations of both consumers and businesses improved in the latest pulse surveys.
