KARACHI: In line with the market expectations, the State Bank of Pakistan (SBP) Monday maintained the status quo in the interest rate at 15% — the highest since November 2008.
The monetary policy committee (MPC) met under the chair of Deputy Governor Syed Murtaza and reviewed the economic indicators. Despite record high inflation the central bank decided to keep the interest rate unchanged for the next six weeks.
The central bank had cumulatively increased the rate by 800 basis points from September 2021 to July 2022 to control inflation and narrow the current account deficit. However, the central bank kept the interest rate unchanged in today’s meeting for the next six weeks.https://e.infogram.com/a5d5f109-641a-4774-80fd-c47154d0c048?src=embed
The central bank today felt that it was “prudent to take a pause at this stage” as it noted that recent inflation developments are in line with expectations, domestic demand is beginning to moderate and the external position is also showing some improvement due to a lower trade deficit and resumption of the International Monetary Fund (IMF) programme.
“This pause allows MPC to assess the impact of 800 bps tightening since September and fiscal consolidation planned for FY23,” the monetary policy statement mentioned, adding that it is also in line with recent actions by other emerging markets central banks, who have been holding rates in recent meetings as global growth and commodity prices have slowed.
The committee also noted that in order to contain external pressures and support the rupee going forward, “it is important to contain the current account deficit by delivering the budgeted fiscal consolidation, lowering energy imports through energy conservation measures, and keeping the IMF programme on track.”
