State Bank announces monetary policy, maintains interest rate

“Since its last meeting in May, the MPC was encouraged by the continued domestic recovery and improved inflation outlook following the recent decline in food prices and core inflation,” the SBP said, in a statement issued after the committee's meeting.

In addition, consumer and business confidence have risen to multi-year highs and inflation expectations have fallen. As a result of these positive developments, growth is projected to rise from 3.9 per cent in FY21 to 4 - 5 per cent this year, and average inflation to moderate to 7 - 9 per cent this year from its recent higher out-turns.

Baqir, addressing a press conference along with SBP officials said that this is the fifth consecutive time that the central bank has decided to maintain the policy rate.

Imports are expected to grow on the back of the domestic recovery and rebound in global commodity prices, albeit more moderately than in FY21.

The MPC noted that the market-based flexible exchange rate system, resilience in remittances, an improving outlook for exports, and appropriate macroeconomic policy settings should help contain the current account deficit in a sustainable range of 2 - 3 per cent of GDP in FY22.

Notwithstanding this moderate current account deficit, the country’s foreign exchange reserves position is expected to continue to improve this year due to adequate availability of external financing.

Against this backdrop, the MPC felt that the uncertainty created by the ongoing fourth Covid wave in Pakistan and the global spread of new variants warrant a continued emphasis on supporting the recovery through accommodative monetary policy.