The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) has opted to keep the policy rate steady at 22%, as announced on Monday. This decision aims to maintain continuity in efforts to curb inflation, with the goal of bringing it down to the targeted range of 5-7% by September 2025.
The MPC highlighted that although inflation has started to decrease as anticipated since the second half of Fiscal Year 2024 (FY24), it remains at a high level. Furthermore, the outlook for inflation is subject to risks, particularly due to elevated inflation expectations.
In light of these factors, the MPC reiterated the importance of continuing the current monetary stance to achieve the inflation target. This assessment is contingent upon sustained targeted fiscal consolidation and the timely realization of planned external inflows, as per the SBP statement.
Additionally, the committee discussed several key developments impacting the macroeconomic outlook since its last meeting:
- Moderate economic activity growth, primarily driven by a rebound in agriculture output.
- Better-than-expected external current account balance, contributing to the maintenance of foreign exchange (FX) reserves despite weak financial inflows.
- Steady increase in inflation expectations among businesses since December, with a slight uptick observed among consumers in March.
- Global commodity prices remaining relatively stable, although oil prices have risen, partly due to ongoing tensions in the Red Sea region.
