State Bank of Pakistan announces policy rate
KARACHI – Pakistan’s central bank has kept the interest rate unchanged at 15 percent, it was announced on Monday.
The Monetary Policy Committee of the State Bank of Pakistan met today to review the economic situation and decide on the policy rate.
The Monetary Policy Committee (MPC) in its statement said with recent inflation developments sin line with expectations, domestic demand beginning 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 current account deficit, the policy rate has been raised by a cumulative 800 basis points since last September, some temporary administrative steps have recently been taken to curtail imports, and strong fiscal consolidation is planned for FY23. These actions are expected to work their way through the system over the coming months.”
SBP said Monetary Policy Committee intends to remain data-dependent, paying close attention to month-on-month inflation, inflation expectations, developments on the fiscal and external fronts, as well as global commodity prices and interest rate decisions by major central banks.
The officials of country’s central bank also noted three key domestic developments including headline inflation that rose further to 24.9 percent in July, with core inflation also ticking up.
This was expected given the necessary reversal of the energy subsidy package – effects of which will continue to manifest in inflation out-turns throughout the rest of the fiscal year – as well as momentum in the prices of essential food items and exchange rate weakness last month.
It said the trade balance fell sharply in July and the Rupee has reversed course during August, appreciating by around 10 percent on improved fundamentals and sentiment.
Lastly, the Board meeting on the on-going review under the IMF programme will take place on August 29th and is expected to release a further tranche of $1.2 billion, as well as catalysing financing from multilateral and bilateral lenders.
SBP maintains that both global commodity prices and the USD have fallen in recent times, in response to signs of a sharper than anticipated slowdown in global growth and nascent market expectations that the US Federal Reserve tightening cycle may be less aggressive than previously anticipated.