Karachi: The State Bank of Pakistan opted to keep the interest rate unchanged at 22%, while adjusting the inflation target to a range of 23% to 25% for the present financial year, as reported in a news source on January 31.
According to the details, the SBP Governor Jameel Ahmad disclosed the monetary policy decision, stating that the Monetary Policy Committee (MPC) has chosen to keep the policy rate steady at 22%. The frequent and significant changes in regulated energy prices have prevented the expected decrease in inflation, making it difficult to achieve a lasting reduction in inflation expectations
Taking into account the inflation in the first half (July-December) of FY24, the anticipated significant decline in the second half, and evolving risks, the MPC expects average inflation to range between 23-25% during this fiscal year, with a noticeable downward trend in FY25, as stated by the central bank. Initially, the SBP projected inflation in the range of 20-22%.
While the main inflation CPI stood at 29.7% in December, Mr. Ahmad anticipates a decrease in January. Despite maintaining the interest rate at 22% throughout this fiscal year, the State Bank has struggled to control inflation.
Governor Ahmad mentioned that the previous medium-term inflation target of 5-7% was expected to be achieved by June 2025. However, this target has now been revised, with the aim to achieve it by September 2025, with a difference of one quarter.
He noted that non-energy inflation continues to moderate in line with the committee’s expectations. Overall, the committee observed that the real interest rate remained significantly positive on a 12-month forward-looking basis, considering the expected downward trajectory of inflation.
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