The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) has opted to maintain the key policy rate at 22 per cent, marking its sixth consecutive decision to uphold the status quo.
In its statement released on Monday, the MPC affirmed its decision, stating, “At its meeting today, the MPC decided to keep the policy rate unchanged at 22 per cent.”
While acknowledging a visible decline in inflation as anticipated in the latter half of Fiscal Year 2024 (H2-FY24), the MPC underscored the persistently high level of inflation and the associated risks, despite a notable deceleration in February. This cautious stance is deemed necessary to steer inflation towards the target range of 5–7 per cent by September 2025.
Against a backdrop of uncertain inflation projections, major central banks worldwide, including those in advanced and emerging economies, have remained conservative in their monetary policy approaches, as highlighted in the MPC statement.
Emphasising the importance of sustained targeted fiscal consolidation and timely realisation of planned external inflows, the MPC reiterated that its assessment hinges on these factors.
Furthermore, the latest economic indicators indicate a moderate upturn in economic activity, primarily driven by a rebound in agricultural output. The external current account balance has outperformed expectations, bolstering foreign exchange reserves despite subdued financial inflows. However, inflation expectations among businesses have steadily risen since December, with consumer expectations inching up in March. Additionally, while global commodity prices have generally remained stable, escalating oil prices, attributed partly to ongoing tensions in the Red Sea, present a notable exception.
Given the uncertainties surrounding the inflation outlook, compounded by potential upward pressure from administered price adjustments or fiscal measures, the MPC deems it prudent to maintain the current monetary policy stance for the time being.
