State Bank of Pakistan maintains policy rate at 12%

KARACHI: The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) on Monday kept the policy rate steady at 12 percent, contrary to expectations of a 50-100BPs cut.

The Monetary Policy Committee (MPC) met today to set the policy rate for the next one and a half months, deciding to keep the interest rate at 12%.

The SBP said that the inflation rate in February was 1.5%, and it is expected to decline further before gradually rising again. For the current fiscal year, inflation is likely to be between 5% and 7%, although risks remain due to food price volatility, energy adjustments, additional taxes and global commodity prices.

For the fiscal year 2024-25, the current account balance is expected to show a surplus, and the GDP deficit is expected to be around 0.5%. The SBP’s reserves are likely to exceed $13 billion by June 2025. In a globally uncertain environment, strengthening external buffers is crucial, with economic growth expected to recover in the second half of FY25 as financial conditions improve.

The State Bank has maintained the economic growth forecast for the current fiscal year at 2.5% to 3.5%, predicting an acceleration in economic activity in the future.

It is noteworthy that in the previous review, the policy rate was reduced by 1%, setting it at 12%.