The State Bank of Pakistan (SBP) has decided to maintain the key policy rate at 22 percent, signaling continuity in its monetary policy approach. This decision, announced after the Monetary Policy Committee (MPC) meeting, underscores the importance of stability in the current economic landscape.
Monetary Policy Committee Emphasizes Stability
The Monetary Policy Committee reaffirmed its commitment to achieving the inflation target range of 5-7% by September 2025. With a view to sustaining positive real interest rates, the committee highlighted the necessity of the existing monetary policy stability and decided to maintain interest rates at 22%.
Navigating Economic Uncertainties
Factors such as global commodity price fluctuations, recent geopolitical events, and upcoming budgetary measures were cited as sources of uncertainty affecting the inflation outlook. Despite a moderate decline in inflation during the second half of the fiscal year, the MPC remains vigilant.
Cautious Approach in Global Context
The decision to maintain the policy rate unchanged reflects a cautious stance, in line with leading central banks globally. Concerns over the pace of disinflation and ongoing economic uncertainties have influenced this approach.
Implications for IMF Standby Arrangement
This decision precedes the conclusion of Pakistan’s $3 billion standby arrangement (SBA) with the International Monetary Fund (IMF). The upcoming IMF Executive Board meeting will decide on the final tranche of $1.1bn, indicating significant implications for the country’s economic trajectory.
