KARACHI :Pakistan’s central bank held its key policy rate at 12 per cent on Monday, it said in a statement, a widely unexpected move which halted an easing cycle that witnessed six straight reductions since June.
The central bank has slashed rates by 1000 bps from an all time high of 22 per cent in June 2024, to revive economic sentiment and growth, while navigating reforms under a $7 billion facility from the International Monetary Fund (IMF) in September.
“On balance, the MPC (monetary policy committee) assessed the current real interest rate to be adequately positive on forward-looking basis to sustain the ongoing macroeconomic stability,” the bank statement said.
The State Bank of Pakistan (SBP), despite the halt in cuts, is one of the most aggressive central banks among central banks of emerging markets during the current easing cycle and has topped the 625 bps in rate cuts it did in 2020 during the COVID-19 pandemic.
At its last policy meeting, SBP kept its forecast of full-year GDP growth at 2.5 per cent to 3.5 per cent, and predicted faster growth would help boost foreign exchange reserves that had been lacklustre.
Pakistan’s economy grew by 0.92 per cent in the first quarter of the fiscal year 2024-25 which ends in June.
Ten of 14 analysts surveyed by Reuters expected the central bank to cut its key rate, while four expected it to hold the rate. Analysts surveyed said they expect inflation may pick up in May as the base year effect wears off.
Pakistan’s consumer inflation rate slowed to a near decade low of 1.5 per cent in February, largely due to a high year-ago base. That was below the government’s forecast and significantly lower than a multi-decade high of around 40 per cent in May 2023.
