SBP announces monetary policy, keeps rate unchanged at 7%

The State Bank of Pakistan (SBP) announced its bi-monthly monetary policy on Monday and decided to maintain its policy rate at 7%, according to a statement issued by the bank.

The Monetary Policy Committee (MPC) noted that since its last meeting in September 2020, domestic recovery has gradually gained traction in line with expectations for growth of slightly above 2% in the fiscal year 2021. The statement added that business sentiment has also improved in the country.

Per the statement, the recent surge in COVID-19 cases across Pakistan, as well as many other countries, present considerable downside risks. However, the news of an upcoming coronavirus vaccine is encouraging.

In terms of inflation, the recent out-turns have been on the higher side primarily due to increases in food prices.

"These supply-side pressures are likely to be temporary and average inflation is expected to fall within the previously announced range of 7-9 per cent for FY21. Taken together, risks to the outlook for both growth and inflation appear balanced," the statement read.

The MPC clarified in its statement that in reaching the decision, key trends and prospects in the real, external, and fiscal sectors, as well as the resulting outlook for monetary conditions and inflation, were taken into consideration.