SBP keeps interest rate unchanged at 22pc

The State Bank of Pakistan (SBP) on Monday maintained the status quo and decided to keep the key policy rate unchanged at 22 per cent. The announcement was made by SBP Governor Jameel Ahmed after a meeting of the bank’s Monetary Policy Committee (MPC). The State Bank said that the moderate growth outlook for the current fiscal year, addressing short-term external sector vulnerabilities in the wake of the International Monetary Fund’s (IMF) stand-by agreement (SBA) and lagged impact of accumulated monetary tightening so far were major factors behind the MPC’s decision. The SBP has raised its key policy rate by 12.25 percentage points since April 2022, mainly to curb soaring inflation. SBP held rates steady in June saying inflation had peaked at 38pc in the preceding month. But before June’s end, it raised rates by 100 bps at an emergency meeting, citing a “slightly deteriorated inflation outlook”. In a press conference today, SBP Governor Jameel Ahmed said the decision to maintain the policy rate was taken after reviewing inflation and external development. “There was a significant decline in year-on-year inflation in June,” he pointed out. Similarly, average inflation during the fiscal year 2023 clocked in at 29.2pc. He highlighted that the MPC had forecasted inflation between 20pc and 22pc for the current fiscal year.