SBP maintains key interest rate at 22pc

The State Bank of Pakistan (SBP) kept the key interest rate unchanged at 22 per cent on Monday, expecting inflation to decline significantly in October because of downward adjustments in fuel prices, easing rates of some major food commodities and a favourable base effect. The Monetary Policy Committee (MPC) of the SBP noted that headline inflation rose in September as expected. The SBP in its previous monetary policy announcement in September also kept the rate unchanged, which surprised the financial sector since the cut-off yields on treasury bills had increased by up to 200 basis points. This time, the cut in the fuel prices of up to Rs40 per litre was a key consideration for the expected no change or a slight increase in the interest rate. “It is projected to decline in October and then maintain a downward trajectory, especially in the second half of the fiscal year,” said the SBP, adding that the recent volatility in global oil prices as well as the increase in gas tariffs from November pose some risks to the 2023-24 outlook for inflation and the current account.