Karachi: State Bank of Pakistan (SBP) decided to hold key policy rate at 22 percent in line with market expectations, with next announcement on December 12.

In statement, central bank said, “At its meeting, Monetary Policy Committee decided to maintain policy rate at 22 percent.”

Committee noted that headline inflation rose in September 2023 (31.4 percent) as expected-major factor in determining key policy rate.

However, SBP said, it is projected to decline in October and then maintain downward trajectory, especially in second half of fiscal year.

MPC expects inflation to decline significantly in October due to downward adjustments in fuel prices, easing prices of some major food commodities, and favourable base effect.

“Committee reaffirmed its earlier assessment that inflation will decline substantially from second half of FY24, barring any major adverse developments,” it added.

Central bank acknowledged that recent volatility in global oil prices as well as increase in gas tariffs from November pose some risks to FY24 outlook for inflation and current account.

BP said that in light of developments, MPC emphasised on continuing with tight monetary policy stance. MPC, statement mentioned, reiterated its earlier view that real policy rate is significantly positive on 12-month forward-looking basis and is appropriate to bring inflation down to medium-term target of 5-7 percent by end of FY25.

Head of Equities at Intermarket Securities Raza Jafri said that SBP was unlikely to rock boat on cusp of International Monetary Fund review and has unsurprisingly kept policy rate unchanged at 22 percent.

However, he said, it does seem to be setting up grounds for interest rate cuts going forward, especially if IMF review is successful and international oil prices remain under control.

Published in The Daily National Courier, October, 31 2023

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