SBP holds policy rate at record 22%

Pakistan’s central bank has opted to keep the benchmark policy rate unchanged for the fifth consecutive time over the past seven months, maintaining the record high at 22%. The State Bank of Pakistan (SBP) anticipates the average inflation reading surging to 23-25% in the current fiscal year of 2023-24. Back in July 2023, the central bank had projected a more conservative inflation reading within the range of 20-22% for FY24. However, SBP Governor Jameel Ahmad, in a press conference detailing the monetary policy stance for the upcoming six weeks, attributed the anticipated spike in inflation to the government’s decision to increase gas and electricity prices. He clarified that excluding these energy-related hikes, the inflation reading remains in line with the July 2023 projection, with non-energy inflation showing signs of moderation. Ahmad expressed expectations of a decline in inflation readings during January and February 2024 from the three-month high of 29.7% recorded in December 2023. However, he cautioned that despite this decline, inflation would remain elevated during Jan-Feb but is anticipated to notably decrease from March 2024 onward.