KARACHI: In line with expectations, the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) kept the key policy rate unchanged at 22%. “At its meeting today, the Monetary Policy Committee (MPC) decided to maintain the policy rate at 22%,” it said in a statement. “The decision does take into account the impact of the recent hike in gas prices on inflation in November, which was relatively higher than the MPC’s earlier expectation. The Committee viewed that this may have implications for the inflation outlook, albeit in the presence of some offsetting developments, particularly the recent decrease in international oil prices and improved availability of agriculture produce. Further, the Committee assessed that the real interest rate continues to be positive on a 12-month forward looking basis and inflation is expected to remain on a downward path.”

MPC continues to expect headline inflation will decline significantly in the second half of FY24 due to contained aggregate demand, easing supply constraints, moderation in international commodity prices and favorable base effect The statement added that the MPC noted several key developments since its October meeting.

“First, the successful completion of the staff level agreement of the first review under the IMF SBA program would unlock financial inflows and improve the SBP’s foreign exchange reserves. “Second, the quarterly GDP growth outcome for Q1-FY24 remained in line with the MPC’s expectation of a moderate economic recovery. Third, recent consumer and business confidence surveys show improvement in sentiments. Finally, core inflation is still at an elevated level and is coming down only gradually. “Taking stock of these developments, the Committee assessed that the current monetary policy stance is appropriate to achieve the inflation target of 5-7 percent by end-FY25. The Committee reiterated that this assessment is also contingent upon continued targeted fiscal consolidation and timely realization of planned external inflows.”

It added that the MPC continues to expect headline inflation will decline significantly in the second half of FY24 due to contained aggregate demand, easing supply constraints, moderation in international commodity prices and favorable base effect.

Published in The Daily National Courier, December, 13 2023

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