SBP retains policy rate unchanged at 22%

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.

 

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.