KARACHI: The State Bank of Pakistan’s (SBP) Monetary Policy Committee took a decision on Monday. It decided to raise its policy rate by 25 basis points to 7.25 per cent.
MPC issued a statement. It said “Since its last meeting in July, the MPC noted that the pace of the economic recovery has exceeded expectations. This robust recovery in domestic demand, coupled with higher international commodity prices, is leading to a strong pick-up in imports and a rise in the current account deficit.”
“Year-on-year inflation has declined since June. Rising demand pressures together with higher imported inflation could begin to manifest in inflation readings later in the fiscal year.
With burgeoning signs the latest COVID wave in Pakistan remains contained. Continued progress in vaccination, and overall deft management of the pandemic by the Government, and the economic recovery now appears less vulnerable to pandemic-related uncertainty.
Committee report
The committee pointed out that now is the more mature stage of the recovery. A greater emphasis is needed on ensuring the appropriate policy mix. It is needed to protect the longevity of growth. Keep inflation expectations anchored, and slow the growth in the current account deficit.
It was of the view that the priority of the monetary policy needs to gradually pivot from catalyzing the recovery. It is necessary after the Covid shock toward sustaining it.
“As foreshadowed in previous monetary policy statements, the MPC noted that this rebalancing can be achieved. It needs gradually tapering the significant monetary stimulus provided over the last 18 months,” the statement further said.
“The MPC noted something over the last few months. He noted the burden of adjusting to the rising current account deficit had fallen. Primarily on the exchange rate and it was appropriate for other adjustment tools, including interest rates, to also play their due role.”
