KARACHI – Pakistan’s central bank has kept the interest rate unchanged at15 percent, it was announced on Monday.
The Monetary Policy Committee of the State Bank of Pakistan met today toreview the economic situation and decide on the policy rate.
The Monetary Policy Committee (MPC) in its statement said with recentinflation developments sin line with expectations, domestic demandbeginning to moderate and the external position showing some improvement,the MPC felt that it was prudent to take a pause at this stage.
It further said “To cool the overheating economy and contain the currentaccount deficit, the policy rate has been raised by a cumulative 800 basispoints since last September, some temporary administrative steps haverecently been taken to curtail imports, and strong fiscal consolidation isplanned for FY23. These actions are expected to work their way through thesystem over the coming months.”
SBP said Monetary Policy Committee intends to remain data-dependent, payingclose attention to month-on-month inflation, inflation expectations,developments on the fiscal and external fronts, as well as global commodityprices and interest rate decisions by major central banks.
The officials of country’s central bank also noted three key domesticdevelopments including headline inflation that rose further to 24.9 percentin July, with core inflation also ticking up.
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This was expected given the necessary reversal of the energy subsidypackage – effects of which will continue to manifest in inflation out-turnsthroughout the rest of the fiscal year – as well as momentum in the pricesof essential food items and exchange rate weakness last month.
It said the trade balance fell sharply in July and the Rupee has reversedcourse during August, appreciating by around 10 percent on improvedfundamentals and sentiment.
Lastly, the Board meeting on the on-going review under the IMF programmewill take place on August 29th and is expected to release a further trancheof $1.2 billion, as well as catalysing financing from multilateral andbilateral lenders.
SBP maintains that both global commodity prices and the USD have fallen inrecent times, in response to signs of a sharper than anticipated slowdownin global growth and nascent market expectations that the US FederalReserve tightening cycle may be less aggressive than previously anticipated.
