SBP decides to keep policy rate unchanged at 12%

KARACHI: The State Bank of Pakistan (SBP) on Monday announced to keep the policy rate unchanged at 12 per cent to sustain the ongoing macroeconomic stability.

The SBP policy rate, after being slashed from 22pc in June 2024, has now stands at 12pc.

The Monetary Policy Committee (MPC) of the SBP meet today to decide the Monetary Policy rate unchanged, while analysts were expecting 50 to 100 basis points cut in the interest rate.

The decision was announced after the Monetary Policy Committee (MPC) meeting on Monday, also warned of potential risks posed by rising food and energy prices.

The bank’s current interest rate has been 12 percent while the inflation dropped in February stood at minimum level of 1.52%.

A Reuters survey of 14 analysts earlier suggested that the central bank may further reduce rates, with a median forecast for a cut of 50 bps.

Of the 10 analysts expecting a rate cut, three estimated its size at 100 bps, one at 75 bps, and six at 50 bps. The rest saw no change.

According to the statement issued by the State Bank of Pakistan, the Monetary Policy Committee decided to keep the policy rate unchanged at 12pc, noting that inflation in February turned out to be lower than expected, mainly due to a drop in food and energy prices.

“Notwithstanding this decline, the committee assessed the risks posed by the inherent volatility in these prices to the current declining trend in inflation,” the notification said.

It said that core inflation was proving to be more persistent at an elevated level, thus, uptick in the food and energy prices might lead to an increase in inflation.

“The MPC assessed the current real interest rate to be adequately positive on forward-looking basis to sustain the ongoing macroeconomic stability,” the notification read.