Monetary policy of Pakistan: SBP likely to keep interest rate unchanged at 9.75%
The State Bank of Pakistan (SBP) is scheduled to meet today to decide on the monetary policy of Pakistan and determine the benchmark interest rate for the next two months at a time of uncertain economic situation, higher inflation reading, and a continuing increase in cases of the new COVID-19 variant – Omicron.
This will be the first monetary policy meeting of calendar year 2022. According to traditional practice, the central bank revises its monetary policy rate up or down or keeps it unchanged over the inflation reading and economic activities.
For example, low inflation mainly leads to a reduction in the monetary policy rate to ramp up economic activities and vice versa. Meanwhile, the rate is left unchanged at a higher level to tame inflation or on the lower side to support economic growth.
Keeping this in view, financial pundits expect the SBP monetary policy committee (MPC) to keep the policy rate unchanged at 9.75%.
To recall, the State Bank of Pakistan (SBP) increased the benchmark interest rate aggressively by 100 basis points to 9.75% last month to counter inflationary pressures and ensure that growth remains sustainable.
The SBP has increased the key policy rate by a cumulative 275 basis points from September to December 2021 to 9.75% to control the rising inflation and narrow the widening current account deficit, while economic activities remain healthy.
Arif Habib Limited, in its pre-monetary policy commentary, stated: “We expect SBP to keep the policy rate unchanged at 9.75% in the upcoming monetary policy statement.”
“To recall, the MPC convened the last meeting in December 2021 and reiterated its stance to ensure the longevity of growth and countering inflation while gradually targeting mildly positive interest rates over time. Read More…
