Central bank keeps policy rate unchanged

PAKISTAN’S central bank kept interest rates steady at seven per cent last Friday (22), indicating it would keep them on hold in the near future as it seeks to balance economic headwinds from the Covid-19 pandemic with the need to curb inflation.

“The (Monetary Policy Committee) felt that the existing accommodative stance of monetary policy remained appropriate to support the nascent recovery while keeping inflation expectations well-anchored,” the State Bank of Pakistan said in a statement.

It is the third time Pakistan has kept its main policy rate unchanged after cutting it by 625 basis points, down from 13.25 per cent at the time the pandemic hit its economy last February.

The bank also provided guidance

STEADY: Reza Baqir, governor

of the State Bank of Pakistan that it planned to keep interest rates unchanged “in the near term” in the absence of “unforeseen developments”, adding any changes to interest rates as the economy recovered would have to be “measured and gradual”.

The result, which was largely in line with analysts’ expectations, was in part due to some domestic economic improvement with the bank saying there were upside risks to the projected two per cent growth projected for 2021, which ends in June.

The bank has also had to balance the need to provide stimulus throughout the pandemic with tempering inflation. However, inflation has eased since hitting a five-year high of more than nine per cent late last year.