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SBP leaves policy rate on hold

403768 014725 updates

State Bank of Pakistan building. — AFP/File
State Bank of Pakistan building. — AFP/File

KARACHI: In line with market expectations, the State Bank of Pakistan (SBP) on Tuesday left the benchmark interest rate unchanged at 9.75% for the next six weeks to maintain a balance between inflation reading and economic growth.

Today’s Monetary Policy Committee (MPC) meeting was the first after the start of the Ukraine-Russia conflict which is posing a threat to the national economy and affecting the stock market.

The interest rate and flexible rupee-dollar parity are the two major tools available with central banks all over the world to control inflation reading and give a direction to the economic trajectory in their respective countries.

The central bank had increased the key policy rate by a cumulative 275bps from September to December 2021 to 9.75% to control the rising inflation and narrow the widening current account deficit, while economic activities remain healthy.

It was the third consecutive monetary policy statement (MPS) in which the central bank maintained the policy rate to support recovery in economic activities despite a higher inflation reading and the recent depreciation of the rupee.

In the last MPS’ forward guidance released on January 24, the central bank had mentioned that “current real interest rates on a forward-looking basis are appropriate to guide inflation to the medium-term range of 5-7%, support growth and maintain external stability. If future data outturns require a fine-tuning of monetary policy settings, MPC expected that any change would be relatively modest.”


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