The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) has announced its decision to maintain the key policy rate at 22 per cent, as outlined in their official statement released today. 

The decision to uphold the policy rate at 22 per cent was reached after careful consideration by the MPC, which took into account various economic factors. One of the pivotal factors influencing this decision was the recent trend in inflation.

In particular, the MPC noted a significant decline in inflation from its peak of 38 per cent in May to 27.4 per cent in August 2023. This trend, coupled with the expectation of a continued downward trajectory in inflation, was a key factor in maintaining the current policy rate. 


Despite recent increases in global oil prices, which have been passed on to consumers through adjustments in administered energy prices, the MPC remains confident in the outlook for inflation, particularly in the latter half of the year. This optimism is based on several factors, including the positive territory of real interest rates on a forward-looking basis.

Additionally, the expected alleviation of supply constraints due to improved agricultural output and recent administrative measures against speculative activities in the foreign exchange and commodity markets are anticipated to support a favorable inflation outlook. 

The MPC also highlighted four noteworthy developments that have occurred since its last meeting in July: 

1. Improved Agricultural Outlook: The latest data on cotton arrivals, improved input conditions, and satellite data indicating healthy vegetation for other crops have contributed to an improved outlook for agriculture. 

2. Rising Global Oil Prices: Global oil prices have experienced an upward trajectory and are currently hovering around the $90/barrel level. 

3. Current Account Deficit: As expected, the current account shifted from surplus to deficit in July, partly attributed to the recent relaxation of import restrictions. 

4. Positive Regulatory Measures: Recent administrative and regulatory actions aimed at enhancing the availability of essential food commodities and curbing illegal activities in the foreign exchange market have started to yield positive results, narrowing the gap between interbank and open market exchange rates. 

The SBP’s MPC affirmed its commitment to closely monitoring risks to the inflation outlook and expressed its readiness to take appropriate actions when necessary to achieve the objective of price stability.

Furthermore, the MPC highlighted the importance of maintaining a prudent fiscal stance to manage aggregate demand effectively. This fiscal responsibility is seen as crucial to achieving the medium-term target of 5-7 per cent inflation by the end of the fiscal year 2025.