The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) on Monday announced no change in the key policy rate maintaining it at 22%.
After the MPC meeting, SBP Governor Jameel Ahmad said that inflation has remained high, with projections for fiscal year 2023-24 revised upwards to 23-25%.
Earlier today, Shahid Ali Habib, CEO, of Arif Habib Limited suggested: “Monetary policy committee should consider the projected inflation numbers for the next 12 months while deciding the policy rate today. Although December CPI was recorded at 29.66% however the rate is sharply coming down to 19.84% for March and 17.47% for May YOY. This indicates that the policy rate should come down by 4% from 22% to 18% by June this year and then 3% more to reach 15% by December.” – said Shahid Ali Habib, CEO, of Arif Habib Limited.
This decision echoes the MPC’s stance in its previous meeting on December 12, where it also opted to keep the key policy rate unchanged at 22%, aligning with market expectations.
During the previous meeting, the MPC reiterated its belief that the real interest rate remains positive on a 12-month forward-looking basis and that inflation is expected to decline.
The committee assessed that the current monetary policy stance is suitable for achieving the inflation target of 5-7 percent by the end of fiscal year 2024-25. It emphasized that this assessment hinges on sustained fiscal consolidation efforts and the timely realisation of planned external inflows.
Moreover, the MPC expressed its anticipation that headline inflation would decrease significantly in the second half of fiscal year 2023-24.
This decline is expected due to contained aggregate demand, easing supply constraints, moderation in international commodity prices, and favorable base effects.
The SBP’s decision to maintain the key policy rate underscores its commitment to managing inflationary pressures while supporting economic stability and growth.
