SBP announces to maintain policy rate at seven percent

KARACHI (92 News) – The Monetary Policy Committee (MPC) on Friday announced to maintain the policy rate at 7 percent.

According to a press release issued by the SBP, the domestic recovery has gained some further traction, while most economic activity data and indicators of consumer and business sentiment have shown continued improvement.

"As a result, there are upside risks to the current growth projection of slightly above two percent in FY21. On the inflation front, recent out-turns are also encouraging and suggesting a waning of supply-side price pressures from food and still-benign core inflation. While utility tariff increases may cause an uptick in inflation, this is likely to be transient given excess capacity in the economy and well-anchored inflation expectations," the release said.

"As a result, inflation is still expected to fall within the previously announced range of 7-9 percent for FY21 and trend toward the 5-7 percent target range over the medium-term. With the inflation outlook relatively benign aside from the possibility of temporary supply-side shocks, the MPC felt that the existing accommodative stance of monetary policy remained appropriate to support the nascent recovery while keeping inflation expectations well-anchored and maintaining financial stability."

The MPC noted that financial conditions remain appropriately accommodative at this early stage of the recovery, with the real policy rate in slightly negative territory on a forward-looking basis.

"Private sector credit has seen an encouraging uptick since the last MPC meeting, driven by a continued rise in consumer and fixed investment loans on the back of SBP’s refinance facilities. Inflation pressures have eased since the last MPC, despite an upward adjustment in fuel prices," it maintained.