State Bank of Pakistan maintains policy rate at 22% despite inflation concerns 

The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) convened today to deliberate on the prevailing economic conditions and has resolved to maintain the policy rate at 22 per cent for the fourth consecutive meeting. 

This decision aligns with market expectations, as a majority of market participants were in agreement regarding the rate remaining unchanged. 

The Monetary Policy Statement issued by the central bank indicates that the decision takes into consideration the impact of the recent increase in gas prices on November’s inflation, which exceeded the MPC’s earlier projections.  

The Committee acknowledged the potential implications of this on the inflation outlook while also noting offsetting factors such as the recent decline in international oil prices and the improved availability of agricultural produce. 

Additionally, the Committee conducted an assessment indicating that the real interest rate remains positive over a 12-month forward-looking horizon and anticipates a downward trajectory for inflation. 

Key developments since the October meeting were considered by the MPC. Firstly, the successful completion of the staff-level agreement for the first review under the IMF SBA programme, which is expected to unlock financial inflows and enhance the SBP’s foreign exchange serves, 

Secondly, the quarterly GDP growth for Q1–FY24 met the MPC’s expectations for a moderate economic recovery. 

Lastly, consumer and business confidence surveys reflected positive sentiment improvements. Lastly, core inflation persists at elevated levels, showing a gradual reduction. 

Considering these developments, the Committee determined that the existing monetary policy stance is conducive to achieving the inflation target of 5-7 per cent by the end of FY25. 

The Committee emphasised that this assessment is contingent on the sustained implementation of targeted fiscal consolidation and the timely realisation of planned external inflows.