On Monday, the State Bank of Pakistan decided to keep its policy rate unchanged at 7 percent in its new monetary policy.
The new policy rate has been maintained at 7 percent as per the decision of the State Bank of Pakistan. The decision was taken in a meeting of the Monetary Policy Committee (MPC) of the SBP, of which the following statement was out, “In reaching its decision, the MPC considered key trends and prospects in the real, external and fiscal sectors, and the resulting outlook for monetary conditions and inflation.”
The statement also says that since the last meeting of MPC was held in June “business confidence and the outlook for growth have improved” in Pakistan. It also said that improvement came out in a way that cases of coronavirus decreased, the lockdown was eased, also, “timely stimulus provided by the government and SBP”.
But, due to “supply side shocks” to food prices the inflation forecast has risen slightly and the rate will now remain within the range of 7-9pc in the fiscal year 2021, State Bank highlighted in the policy rate meeting.
It also said that the central bank and the federal government took targeted measures that have been injected with Rs 1.58 trillion or around 3.8pc of GDP in the cash flow of both businesses and households.
Monetary Policy Committee also noted that the manufacturing sector of Pakistan had expanded by 5 percent after the fall in March and April due to coronavirus lockdown that was necessary to impose to stem the pandemic. Not all the industries observed a parallel growth, however, and economic activity “generally still remains below pre-corona levels”.
The statement further reads, “Taking into account the changes in the outlook for inflation and growth since the last MPC and the impact of the stimulus measures undertaken by the Government and SBP, the MPC was of the view that the stance of monetary policy remained appropriate to provide needed support to the emerging recovery while keeping inflation expectations well-anchored and maintaining financial stability.”