State Bank holds benchmark interest rate at 13.25% – Business

The State Bank of Pakistan (SBP) maintained its main policy rate at 13.25 percent on Monday, pausing a series of recent increases that, he said, had been sufficient to ensure that the country's high inflation would be gradually reduced by the next years.

The Central Bank Monetary Policy Committee (MPC) said in a statement that it had decided that withholding rates were justified as inflation had not accelerated dramatically since its last meeting. His current monetary policy stance was appropriate to reduce inflation to the target range of 5-7 percent in the next 24 months, he said.

"The decision reflected the MPC's view that inflation results have been largely as expected and inflation projections […] they have remained unchanged since the last MPC meeting, ”the bank said in the statement, but added that inflation was expected to increase to an average of 11pc to 12pc in 2020.

The decision comes at a time of scrutiny of the economy when an International Monetary Fund (IMF) team arrived in Islamabad on Monday to review the progress of the agreed reforms as part of a rescue package in July.
Under the terms of the $ 6 billion bailout, the government has implemented tough measures to meet the fiscal deficit target set by the IMF.

The MPC observed two key developments since its last meeting that influenced its decision.

"First, the interbank foreign exchange market had adjusted relatively well to the introduction of the market-based exchange rate system. Initial volatility and associated uncertainty in the foreign exchange market had diminished. Reflecting these improved feelings and continued adjustment in The current account, The Rupee had strengthened modestly against the US dollar since the last MPC, unlike its previous trend.

"Second, on the external front, the Federal Reserve of the United States, as anticipated, reduced its policy rate by 25 basis points (bp), followed by cuts in policy rates by other major central banks of around the world. This would help reduce pressures on emerging markets & # 39; currencies and potentially increase financial inflows. "

The bank has raised rates nine times since the beginning of 2018, rising 100 basis points at its last meeting in July, while policymakers tried to maintain control of rising inflation, a substantial fiscal deficit and a falling rupee.

Although those challenges continued, the currency had reaffirmed and inflation had stabilized in August, rising slightly to 10.5 percent from 10.3 percent the previous month.

However, analysts pointed out that this was largely due to a series of changes in the way the rate was calculated, such as the inclusion of prices in rural areas and the decrease in the weighting of some items, such as housing. and the transport. According to the previous measure, the inflation rate would have increased to 11.6 percent.