State Bank of Pakistan (SBP) Maintains 22% Policy Rate: The SBP's Monetary Policy Committee (MPC) has decided to keep the policy rate unchanged after its recent meeting. This decision is based on several factors, including a notable decline in inflation, which has fallen from its peak of 38% in May to 27.4% in August 2023.
Despite recent increases in global oil prices and the pass-through of energy cost adjustments to consumers, the SBP remains optimistic about ongoing inflation reduction, particularly in the latter part of the year. This optimism is bolstered by the expected alleviation of supply constraints, driven by improved agricultural output and administrative measures aimed at curbing speculative activities in foreign exchange and commodity markets.
The MPC acknowledged four noteworthy developments since its July meeting. Firstly, the agriculture sector has shown signs of improvement, marked by positive indicators like cotton arrivals, favorable input conditions, and robust vegetation in other crops. Secondly, global oil prices have been on an upward trend, with current prices hovering around $90 per barrel.
Thirdly, as anticipated, the current account shifted from surplus to deficit in July, ending four consecutive months of surplus, partly attributed to the relaxation of import restrictions. The MPC reaffirmed its commitment to closely monitoring inflation risks and taking necessary actions to maintain price stability. Furthermore, it stressed the importance of maintaining a prudent fiscal stance to effectively manage aggregate demand.
