KARACHI -UNS: The State Bank of Pakistan (SBP) announced on Monday that it has decided to keep the policy rate unchanged at 12 per cent, assessing the current real interest rate to be adequately positive on the forward-looking basis to sustain the ongoing macroeconomic stability.
The central bank’s policy rate, after being slashed by 1,000bps from 22pc since June 2024 in six intervals, now stands at 12pc.
February inflation stood at a near-decade low of 1.5pc, largely due to a high base a year ago. A Reuters survey of 14 analysts suggests that the central bank may further reduce rates, with a median forecast for a cut of 50 bps. Of the 10 analysts expecting a rate cut, three estimated its size at 100 bps, one at 75 bps, and six at 50 bps. The rest saw no change.
According to a notification issued by the State Bank of Pakistan today, the Monetary Policy Committee (MPC) decided to keep the policy rate unchanged at 12pc, noting that inflation in February turned out to be lower than expected, mainly due to a drop in food and energy prices.
“Notwithstanding this decline, the committee assessed the risks posed by the inherent volatility in these prices to the current declining trend in inflation,” the notification said.
It said that core inflation was proving to be more persistent at an elevated level, thus, uptick in the food and energy prices might lead to an increase in inflation.
“Economic activity continues to gain traction, as reflected in the latest high-frequency economic indicators,” it said, adding that MPC viewed that some pressures on the external account emerged due to rising imports amid weak financial inflows.
“The MPC assessed the current real interest rate to be adequately positive on [the] forward-looking basis to sustain the ongoing macroeconomic stability,” the notification said.
According to the notification, the committee noted that the current account turned into a deficit of $0.4 billion in January after remaining in surplus over the past few months.
It said that the current account deficit, coupled with weak financial inflows and ongoing debt repayments, led to a decline in the SBP’s foreign exchange reserves.
It said that large-scale manufacturing output declined during the first half of the fiscal year 2025, despite a substantial increase of 19.1pc in December 2024.
“The shortfall in tax revenues from target widened further in January and February,” the notification said.
