KARACHI: The State Bank of Pakistan (SBP) decided to leave its key interest rate unchanged at 15% for the next seven weeks.
“The committee was of the view that based on currently available information, the existing monetary policy stance strikes an appropriate balance between managing inflation and maintaining growth in the wake of the floods,” the central bank in a thread shared on Twitter.
Today’s Monetary Policy Committee (MPC) meeting was the first after the start of SBP Governor Jameel Ahmad and Finance Minister Ishaq Dar assumed charge.
The decision to maintain a status quo was in line with Dar’s old recipe of running a controlled economy, under which he would like to have an easy monetary policy.
The SBP has increased the rate by a cumulative 800 basis points in 11 months (September 2021 to July 2022) to 15%.
The interest rate and flexible rupee-dollar parity are the two major tools available to central banks all over the world to control inflation readings and give direction to the economic trajectory in their respective countries.
The central band, in a statement issued, said that the since the last meeting on August 22 the MPC noted the deceleration in economic activity as well as the decline in headline inflation and current account deficit.
It also noted that the recent floods have altered the macroeconomic outlook and a fuller assessment of their impact is underway.
Since the last meeting, the monetary policy committee has noted key developments including:
The desired moderation in economic activity has become more visible and entrenched, signalling that the tightening measures implemented over the last year are gaining traction.
After peaking in August as expected, headline inflation fell last month due to an administrative cut in electricity prices. However, core inflation continued to drift upwards.
Current account and trade deficits narrowed significantly in August and September and the rupee has recouped some of its losses.
The combined 7th and 8th review under the ongoing IMF programme was successfully completed on August 29, releasing a tranche of $1.2 billion.
