Karachi:The State Bank of Pakistan (SBP) on Monday decided to maintain the status quo by keeping the key policy rate unchanged 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.”
It further said that incoming data continues to support the MPC’s earlier expectation of a moderate recovery in this fiscal year with real GDP growth projected to remain in the range of 2 to 3%.
Agriculture sector remains the key driver with robust 6.8% growth in the first half of FY24.
In the industrial sector, large-scale manufacturing reported a 0.5% decline in July-February FY24 compared to 4.0% contraction recorded in the same period last year while the services sector’s growth in the first half was slightly lower than expected, reflecting the impact of subdued demand.
“
.
“
