By Staff Reporter
KARACHI: Pakistan’s central bank maintained its benchmark interest rate at 22 percent on Monday, in a widely anticipated move that marks the sixth consecutive policy meeting without a change.
The decision comes as the nation grapples with persistent inflation risks, despite recent signs of easing.
The State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC) announced the hold ahead of the April expiration of a $3 billion standby arrangement with the International Monetary Fund (IMF).
Analysts had largely predicted the outcome, though there is a growing expectation for rate cuts starting in the second quarter.
Inflation in Pakistan slowed in February, with the consumer price index climbing 23.1 percent from a year earlier, marking the slowest increase since June 2022.
The central bank attributed the deceleration to a base effect but warned that inflation remains high and vulnerable to future risks, including potential adjustments in administered prices or new fiscal measures.
The MPC underscored the need for a cautious approach, emphasizing the importance of maintaining the current monetary stance to achieve an inflation target of 5–7 percent by September 2025.
“At its meeting today, the MPC decided to keep the policy rate unchanged at 22 percent… In approaching the decision, the MPC noted that inflation, in line with earlier expectations, has begun to decline noticeably from H2-FY24,” the central bank said in a statement.
“It, however, observed that despite the sharp deceleration in February, the level of inflation remains high and its outlook is susceptible to risks amidst elevated inflation expectations. This warrants a cautious approach and requires continuity of the current monetary stance to bring inflation down to the target range of 5–7 percent by September 2025.”
The central bank said the situation warrants a cautious approach and requires continuity of the current monetary stance to bring inflation down to the target range of 5–7 percent by September 2025.
The bank’s last rate hike occurred in June, aimed at combating inflationary pressures and satisfying IMF conditions for a critical financial bailout in July 2023. The bailout has been instrumental in helping Pakistan avoid a sovereign debt default.
In January, the central bank revised its average inflation forecast for the fiscal year ending in June upward to 23 percent-25 percent, from an earlier estimate of 20 percent-22 percent, citing rising gas and electricity prices. Inflation peaked at an all-time high of 38 percent in May last year, driven in part by new taxation measures to meet IMF requirements.
During an analyst call, the central bank governor reported progress in discussions with the IMF over the third tranche of the ongoing bailout program but did not speculate on the expected outcome. He also mentioned anticipated debt payment rollovers totaling $6 billion through June.
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