SBP Holds Policy Rate Steady at 22%

SBP Policy Rates Maintains at 22%: Focus on Inflation and Stability

SBP Maintains 22% Policy Rate: Monetary Policy Statement

In its recent announcement, the State Bank of Pakistan (SBP) upheld the policy rate at 22 percent after careful evaluation of economic conditions.

The announcement was made after the meeting of Monetary Policy Committee in Karachi on Monday March 18, 2024

Despite a decline in inflation since the latter half of FY24, the SBP remains vigilant due to persistent high inflation levels.

MPC decided to maintain the policy rate at 22 percent on a 6th consecutive meetings.

Focus on Stability and Inflation Targets

Emphasizing the need to stabilize inflation within the target range of 5 – 7 percent by September 2025.

The SBP underscores the importance of continuous fiscal consolidation efforts and timely realization of external inflows.

Key Economic Developments

Transitioning to economic developments, the SBP notes a moderate upturn in economic activity, primarily driven by agricultural output.

However, it highlights rising inflation expectations among businesses and consumers, warranting a cautious approach in monetary policy decisions.

Sectoral Outlook

Looking at specific sectors, the SBP anticipates a gradual recovery in economic activity for FY24, with positive indicators in the agriculture, manufacturing, and services sectors.

While the external sector shows improvement with a narrowing current account deficit, financial inflows witnessed a minor decline.

Fiscal Consolidation Focus

Despite improvements in the primary surplus, the overall fiscal deficit has expanded due to increased interest payments and domestic financing reliance, making fiscal consolidation a priority.

Money and Credit Trends

Transitioning to monetary trends, broad money and reserve money growth have moderated, signaling positive prospects for inflation management.

However, the SBP remains cautious of inflation risks from adjustments in administered energy prices.

Commitment to Stability

Concluding with the SBP’s commitment to stability, the decision to maintain the policy rate underscores its dedication to ensuring macroeconomic stability amidst evolving economic dynamics.

This announcement reaffirms the SBP’s proactive approach towards addressing inflation concerns and fostering sustainable economic growth.

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