In line with the market expectations, the State Bank of Pakistan (SBP) on Monday maintained its key interest rate at 22% for the seventh time in a row.

In its meeting today, the Monetary Police Committee (MPC) noted that the macroeconomic stabilisation measures are contributing to considerable improvement in both inflation and external position, amidst moderate economic recovery.

“However, the MPC viewed that the level of inflation is still high. At the same time, global commodity prices appear to have bottomed out with resilient global growth,” as per a statement issued following the meeting.

The MPC said recent geopolitical events have also added uncertainty about their outlook. Moreover, the upcoming budgetary measures may have implications for the near-term inflation outlook, it added.

On balance, the committee stressed on continuation of the current monetary policy stance to bring inflation down to the target range of 5 to 7% by September 2025. 

‘Current account recorded sizable surplus’

The MPC said data for the first half of fiscal year 2024 suggested that economic activity is recovering at a moderate pace, led by strong rebound in agriculture sector.

Moreover, the current account recorded a sizable surplus in March 2024, which helped to stabilise the SBP’s foreign exchange reserves despite substantial debt repayments and weak financial inflows, as per the communique.

“Third, inflation expectations of consumers inched up in April 2024, whereas those for businesses declined. And lastly, leading central banks particularly in advanced economies have adopted cautious policy stance after noticing some slowdown in the pace of disinflation in recent months.” 

More to follow…