The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) has decided to maintain the policy rate at 22% for the next two months, in its meeting held on Monday.
The committee meeting, chaired by the SBP governor, noted that despite the sharp decline in February, inflation remained at an elevated level, adding that the inflation outlook is also susceptible to risks amidst elevated inflation expectations.
This is the central bank’s sixth successive decision to keep the policy rate unchanged.
The MPC further assessed that these circumstances warranted a cautious approach and continuity of the current monetary stance to ring inflation down to the target range of 5-7% by September 2025. “The Committee reiterated that this assessment is also contingent upon continued targeted fiscal consolidation and timely realization of planned external inflows,” the SBP statement added.
The MPC noted a few key developments since its last meeting, which have implications for the macroeconomic outlook. “First, the latest data continues to depict a moderate pick-up in economic activity, led by a rebound in agriculture output. Second, the external current account balance is turning out better than anticipated and has helped maintain FX buffers despite weak financial inflows,” the statement said.
It further said that while inflation expectations of businesses had shown a steady increase since December, those for consumers had also inched up in March. “Lastly, on the global front, while the broader trend in commodity prices remained benign, oil prices have increased; partly reflecting the continued tense situation in the Red Sea,” it added.
Moreover, amidst uncertainty regarding the inflation outlook, the MPC said, key central banks in both advanced and emerging economies have continued to maintain a cautious monetary policy stance in recent meetings.
The IMF had demanded not to reduce the interest rate and the business community had also demanded to reduce it. The State Bank will also brief economists on the new monetary policy today.
