Monetary Policy Today

EA Report
KARACHI: The State Bank of Pakistan (SBP) is unveiling its monetary policy today (Monday) for the next two months.
The Monetary Policy Committee of SBP scheduled to meet on Monday at SBP Karachi to review the performance of key economic indicators and decide about the Monetary Policy. Later on, SBP will issue the Monetary Policy Statement.
The committee in its last meeting held on 27th July 2021, decided to maintain the policy rate at 7 percent to support economic growth. The growth projected to rise from 3.9 percent in FY21 to 4-5 percent this year.
And Economic recovery was expected to be accompanied by external stability by SBP
However, the MPC has already said that it will carefully monitor the developments affecting medium-term prospects for inflation, financial stability and growth and is prepared to respond appropriately, as and when required.
At its meeting on 27th July 2021, the MPC decided to maintain the policy rate at 7 percent,” read the monetary policy statement on Tuesday. “Since its last meeting in May, the MPC was encouraged by the continued domestic recovery and improved inflation outlook following the recent decline in food prices and core inflation.
“In addition, consumer and business confidence had risen to multi-year highs and inflation expectations have fallen. As a result of these positive developments, growth is projected to rise from 3.9 percent in FY21 to 4-5 percent this year, and average inflation to moderate to 7-9 percent this year from its recent higher out-turns.”
Previous statement added that Pakistan’s imports were expected to grow on the back of the domestic recovery and rebound in global commodity prices, albeit more moderately than in FY21. Pakistan’s imports clocked in at $53.8 billion during the previous fiscal year, contributing significantly to the trade deficit even as exports registered a historic high.
The previous MPC noted that the market-based flexible exchange rate system, resilience in remittances, an improving outlook for exports, and appropriate macroeconomic policy settings should help contain the current account deficit in a sustainable range of 2-3 percent of GDP in FY22.
“Notwithstanding this moderate current account deficit, the country’s foreign exchange reserves position is expected to continue to improve this year due to adequate availability of external financing. Against this backdrop, the MPC felt that the uncertainty created by the on-going fourth Covid wave in Pakistan and the global spread of new variants warrants a continued emphasis on supporting the recovery through accommodative monetary policy.”

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