Pakistan central bank holds rates at 22%, revises up inflation forecast
Reuters
Published Jan 29, 2024 07:02AM ET
Updated Jan 29, 2024 07:46AM ET
By Ariba Shahid
KARACHI (Reuters) -Pakistan's central bank on Monday held its key rate at 22% for the fifth policy meeting in a row and increased its full-year inflation projections.
The governor of the State Bank of Pakistan said the decision was warranted due to "elevated" inflation - which was 29.7% in December. He said a rise in the bank's average inflation forecast for the fiscal year ending in June to 23-25%, from a previous projection of 20-22%, was due to rising gas and electricity prices.
The decision is the last under a caretaker government before general elections due next week and comes as Pakistan undertakes reforms linked to a $3 billion Standby Arrangement with the International Monetary Fund (IMF).
"SBP opted for a wait and see approach during this policy (meeting) and refrained from abruptly starting a monetary easing cycle," said Tahir Abbas, head of research at Arif Habib Limited.
"Economic indicators are gradually improving and inflation is expected to decline significantly from March 2024 onwards, where we believe that (the) SBP is expected to start a monetary easing cycle," he said.
The country's external accounts and foreign exchange reserves have improved, the current account deficit is expected to shrink, the central bank's governor Jameel Ahmad said.
Pakistan's key rate was raised to an all-time high of 22% in June to fight persistent inflationary pressures and to meet one of the conditions set by the IMF for securing the bailout.
While the rescue programme has helped avert a sovereign debt default, some of the attached conditions, such as raising its benchmark interest rate, increasing government revenue, and increasing electricity and natural gas prices, have complicated efforts to curb inflation and have dampened business sentiment.
But Ahmad said that Pakistan was in a "better position" since signing the IMF stand-by agreement.
Despite negative real rates, the business community had been pushing for a rate cut for some respite amidst the economic challenges.
Get The News You Want
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.