SBP announces to uphold interest rate at 22%

KARACHI (92 News) - The State Bank of Pakistan (SBP) on Monday announced to uphold the interest rate at 22%.

Addressing a press briefing, SBP Governor Jameel Ahmed said that inflation would reduce after March. "The foreign exchange reserves are improving and they have reached at US$8 billion. The inflation will remain at 25-30 percent by the end of the year. In May 2023, the inflation was at its peak," he announced.

The decision to maintain the interest rate was made during a meeting of the Monetary Policy Committee (MPC).

While arriving at the decision, the committee observed that the frequent and sizeable adjustments in administered energy prices have slowed down the pace of decline in inflation anticipated earlier, besides impeding a sustained decrease in inflation expectations. On the other hand, the non-energy inflation continues to moderate, in line with the committee’s expectations. On balance, the committee viewed that the real interest rate remained significantly positive on 12-month forward looking basis, as inflation is expected to remain on a downward path.

The MPC noted several key developments since its December meeting, which have implications for the economic outlook. First, the FX reserves have improved on the back of a notable surplus in the current account in December and significant financial inflows, including the latest IMF SBA tranche. Second, fiscal consolidation remained on track and complemented the monetary policy stance. Third, the business sentiments, as reflected in the recent surveys, continued to improve. However, the escalated geopolitical tensions in the Red Sea region have led to a surge in global freight charges and are posing risks for global trade and commodity prices.