The State Bank of Pakistan (SBP) has announced its monetary policy for the next two months, and decided to maintain the policy rate at 22%.

This was decided at a meeting of the Bank's Monetary Policy Committee (MPC) on Thursday.

1/4 Monetary Policy Committee (MPC) decided to maintain the policy rate at 22 percent in its meeting today. https://t.co/Rns1WF4AsB #SBPMonetaryPolicy pic.twitter.com/HT9w9wWZAU
— SBP (@StateBank_Pak) September 14, 2023

The MPC noted that while global oil prices had risen recently, inflation was still projected to trend down, especially from the second half of this year.

It also assessed that the tight monetary policy stance, improved agriculture outlook, and recent administrative and regulatory reforms will help achieve the medium-term inflation target. The MPC further stressed on maintaining a prudent fiscal stance to keep aggregate demand in check.

According to the monetary policy statement, the decision to maintain policy rate took into account the latest inflation outturn reflecting the continuing declining trend in inflation from its peak of 38% in May to 27.4% in August.

The MPC noted four key developments since its July meeting.

First, agriculture outlook has improved, based on the latest data on cotton arrivals, better input conditions, and satellite data indicating healthy vegetation of other crops. Second, global oil prices have been rising and are now hovering over $90/barrel level. Third, the current account posted a deficit in July after remaining in surplus
for the last four months, partly reflecting the impact of the recent ease in import restrictions.

Finally, recent administrative and regulatory measures aimed at improving availability of essential food commodities and curbing illegal activities in the foreign exchange market have begun to yield results.

The MPC also noted that it will continue to monitor the risks to the inflation outlook and, if required, take appropriate action to achieve the objective of price stability.

At the same time, the committee also stressed on maintaining a prudent fiscal stance to keep aggregate demand in check. This is necessary to bring inflation down on a sustainable basis and to achieve the medium-term target of 5% to 7% by end-FY25.