The State Bank of Pakistan (SBP) decided to leave the policy rate unchanged at 13.25% on Monday.
The decision reflects the Monetary Policy Committee’s view that inflation outcomes have been largely as expected and inflation projections for FY20 have remained unchanged since the last MPC meeting on July 16, read a statement issued by the central bank.
The MPC also viewed that, based on available information, the current stance of monetary policy was appropriate to bring inflation down to the target range of 5 – 7 per cent over the next 24 months.
The decision coincides with a visit of the IMF team to Islamabad to review progress on reforms agreed as part of a bailout package in July.
The MPC noted two key developments since the last MPC meeting.
“First, the interbank foreign exchange market had adjusted relatively well to the introduction of the market-based exchange rate system. The initial volatility and associated uncertainty in the exchange market had subsided. Reflecting these improved sentiments and continued adjustment in the current account, the rupee had strengthened modestly against the US dollar since the last MPC, unlike its previous trend,” the statement read.
The second development was on the external front. The statement read that the US Fed, as anticipated, reduced its policy rate by 25 basis points, followed by policy rate cuts by other major central banks around the world. This, MPC, believes will help in lowering pressures on emerging markets’ currencies and potentially increase financial inflows.