Islamabad: The State Bank of Pakistan (SBP) opted to keep the key interest rate steady at a historic 22% during its fourth consecutive meeting on Tuesday, as claimed by a news source on December 13.
According to the details, the decision reflects the bank’s anticipation of a noteworthy decline in inflation during the latter half of the fiscal year. Despite a surge in November’s inflation figures, most independent economists and analysts had predicted the central bank would maintain the current interest rate. The Monetary Policy Committee (MPC) acknowledged the impact of last month’s rise in gas prices.
The SBP had previously raised the policy rate to 22% in an off-cycle meeting on June 26, as a final effort to secure a USD 3 billion bailout from the International Monetary Fund (IMF) within the framework of a reform program aimed at stabilizing the economy.
The Pakistani economy has grappled with persistent high price pressures, with monthly consumer price index-based inflation remaining above 20% since June 2022, peaking at a record 38% in May this year. Despite assurances from both the SBP and the IMF regarding an anticipated easing of inflation in the current financial year, November witnessed inflation at 29.2% after the government raised energy prices to meet reform targets.
The Central Bank emphasised that the current monetary policy stance is deemed appropriate to achieve the inflation target of 5% to 7% by the end of the fiscal year 2024-25. Additionally, the SBP projected a moderate recovery in real GDP for the current fiscal year, with the first-quarter estimates indicating a year-on-year growth of 2.1%, compared to 1% a year ago.
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