Policy rate may be kept unchanged


KARACHI: The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) is most likely to keep the policy rate unchanged at 7 percent for next two month.

The committee is scheduled to meet on Friday (May 28) for deliberation on key economic issues to take a decision on key policy rate. The MPC in its last meeting held on March 19, 2021, maintained the policy rate at 7 percent as the committee noted that growth and employment continued to recover and business sentiments were further improved.

During the last meeting, the committee also hinted that in the absence of unforeseen developments, monetary policy settings to remain broadly unchanged in the near term.

Accordingly, most of economists are expecting that the MPC is likely to maintained the policy rate at current level to support the economic growth. Renowned economists Samiullah Tariq and Khurram Schehzad said that policy rate is expected to remain unchanged at 7 percent on stable balance of payment and mitigation of negative impact from the third wave of Covid-19.

On external account side, the country’s current account is remained surplus during this fiscal year supported by healthy home remittances inflows and growth in exports. Pakistan has received all time high workers’ remittance amounted to $24.24 billion during July-April of this fiscal year and the home remittances inflows are likely to reach near about $30 billion by end of June 21.

During April, inflation witnessed upward trend, however, it was as per expectation. The MPC already felt that the existing accommodative stance of monetary policy were appropriate to support the recovery while keeping inflation expectations well-anchored.

However, an economist Muzzammil Aslam expecting that MPC may increase the policy rate by 25-50 basis points due to rising inflationary pressure on the economy.

Previously, the policy rate was changed in June 2020, when the MPC reduced the policy rate by 100 basis points to 7 percent and since then policy rate is stable at this level.