SBP State Bank of Pakistan’s Monetary Policy Committee (MPC) maintain the policy rate at 22%.
On September 14, 2023, the State Bank of Pakistan’s Monetary Policy Committee (MPC) convened and reached a decision to maintain the policy rate at 22%, a move that defied market expectations. The prevailing consensus among market participants had leaned towards an anticipated rate hike of 100-200 basis points.
This decision took into account the most recent inflation data, which demonstrated a consistent downward trend in inflation rates, dropping from its peak of 38% in May to 27.4% in August 2023. Despite recent increases in global oil prices, which are being passed on to consumers through adjustments in energy prices, the outlook remains optimistic for a further decline in inflation, particularly in the latter half of the year.
Consequently, real interest rates are expected to remain positive when considering future developments. Additionally, the anticipated alleviation of supply constraints, attributed to improved agricultural output, along with recent administrative measures targeting speculative activities in foreign exchange and commodity markets, are poised to provide further support to the outlook for inflation.
Simultaneously, the MPC emphasized the importance of maintaining a responsible fiscal approach to control aggregate demand. This strategy is deemed essential for achieving a sustainable reduction in inflation and reaching the medium-term target of 5-7% by the end of the fiscal year 2025.