KARACHI: The State Bank of Pakistan (SBP) on Monday decided to maintain the policy rate at 22 percent for the seventh consecutive session.

This decision followed a meeting of the bank’s Monetary Policy Committee (MPC). According to a statement by the MPC, the emphasis remains on continuing the current monetary policy stance to reduce inflation to the target range of 5 – 7 percent by September 2025.

Despite noting a significant improvement in inflation and the external position due to macroeconomic stabilization measures and a modest economic recovery, the committee acknowledged that inflation levels remain high.

It highlighted that global commodity prices seem to have stabilized, yet recent geopolitical events and forthcoming budgetary measures could affect near-term inflation.

Last month, the committee had maintained the status quo by keeping the key policy rate unchanged at 22 percent.

In today’s statement, the MPC observed that data for the first half of fiscal year 2024 indicates a moderate recovery in economic activity, particularly driven by a strong rebound in the agriculture sector.

Additionally, a notable surplus in the current account in March 2024 helped stabilize the SBP’s foreign exchange reserves despite significant debt repayments and weak financial inflows.

The MPC also mentioned that while consumer inflation expectations increased in April 2024, those for businesses declined. Furthermore, leading central banks, particularly in advanced economies, have adopted a cautious policy stance in response to a slowdown in disinflation.

The committee reaffirmed its earlier expectation of a moderate recovery in the fiscal year, with real GDP growth projected to remain between 2 to 3 percent.

The agriculture sector, with a robust 6.8 percent growth in H1-FY24, was highlighted as a key driver, supported by significant increases in rice, cotton, maize, and wheat harvests. In contrast, the industrial sector experienced a 0.5 percent decline in July-February FY24, compared to a 4.0 percent contraction in the same period last year.

The services sector, although slightly below expectations in H1, is expected to recover in the coming months based on improved capacity utilization, business sentiments, and a favorable base effect from the previous year.