SBP maintains interest rate at 22 percent

KARACHI (92 News) - The State Bank of Pakistan on Tuesday decided to maintain the interest rate at 22 percent.

The decision was made during a meeting of the SBP Monetary Policy Committee (MPC). The decision does take into account the impact of the recent hike in gas prices on inflation in November, which was relatively higher than the MPC’s earlier expectation.

The committee viewed that this may have implications for the inflation outlook, albeit in the presence of some offsetting developments, particularly the recent decrease in international oil prices and improved availability of agriculture produce.

Further, the committee assessed that the real interest rate continues to be positive on a 12-month forward looking basis and inflation is expected to remain on a downward path.

The MPC noted several key developments since its October meeting. First, the successful completion of the staff level agreement of the first review under the IMF SBA program would unlock financial inflows and improve the SBP’s FX reserves. Second, the quarterly GDP growth outcome for Q1-FY24 remained in line with the MPC’s expectation of a moderate economic recovery.  

Third, recent consumer and business confidence surveys show improvement in sentiments. Finally, core inflation is still at an elevated level and is coming down only gradually.

Taking stock of these developments, the committee assessed that the current monetary policy stance is appropriate to achieve the inflation target of 5-7 percent by end-FY25. It reiterated that this assessment is also contingent upon continued targeted fiscal consolidation and timely realization of planned external inflows.