Following the consensus in the broader market, the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) announced on Monday that it would maintain the key policy rate at 22 per cent, as stated in their press release.
The Committee recognised that headline inflation, as expected, increased in September 2023 but anticipates a decline in October, followed by a sustained decrease, particularly in the latter half of the fiscal year.
While the MPC acknowledged potential risks to the FY24 inflation outlook and the current account due to recent global oil price volatility and forthcoming gas tariff increases in November 2023, they also identified mitigating factors.
These factors include targeted fiscal consolidation in the first quarter, enhanced availability of crucial commodities in the market, and the alignment of interbank and open market exchange rates.
The MPC emphasised that the real policy rate, looking forward over a 12-month horizon, remains significantly positive.
This is deemed appropriate to achieve the medium-term inflation target of 5-7 per cent by the end of FY25, contingent upon the sustained fiscal consolidation and timely realisation of planned external inflows, as articulated in the MPC statement.
