KARACHI – The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) decided on Monday to maintain the policy rate at 15%, citing the need for continued stability despite a slight decline in headline inflation. The decision comes as a surprise to some market players who were expecting a minor cut to stimulate industrial growth.
In its official statement, the SBP noted that while consumer price inflation has eased to 11.5% in the last month, the risks associated with global oil prices and upcoming fiscal adjustments remain high. “The committee emphasized the importance of maintaining a tight monetary stance to ensure that inflation stays on a downward trajectory and reaches the medium-term target of 5-7%,” the SBP Governor explained during a post-meeting press conference.
The business community has reacted with caution. Leaders of the Karachi Chamber of Commerce and Industry (KCCI) expressed concern that high borrowing costs are stifling the manufacturing sector. “We understand the need to control inflation, but the industry needs lower rates to expand and create jobs. A 15% rate makes it nearly impossible for SMEs to survive,” a KCCI representative stated.
On the other hand, financial analysts believe the SBP is playing it safe to satisfy International Monetary Fund (IMF) conditions. “With the current economic climate, a premature rate cut could lead to a surge in imports and put pressure on the rupee. The SBP is prioritizing exchange rate stability over short-term growth,” noted a leading financial consultant.
The central bank has assured that it will continue to monitor global and domestic developments closely. The next MPC meeting is scheduled in six weeks, when a potential easing might be considered if inflation data continues to show improvement.
