KARACHI– Pakistan has kept its main policy rate unchanged at 7%, the central bank said on Monday, as consumer price index inflation remained close to 9%.
It is the second time that Pakistan has kept its main policy rate unchanged after cutting it 625 basis points, down from 13.25%, at the time the global pandemic hit its economy in February.
“Overall financial conditions remain appropriately accommodative, with the real policy rate remaining in slightly negative territory on a forward-looking basis,” a statement from the State Bank of Pakistan said, quoting the monetary policy committee (MPC), which met on Monday.
The statement said headline inflation had fallen sharply since January but remained close to 9%, primarily driven by sharp increases in food items due to supply-side issues.
However, it said core inflation remained relatively moderate and stable, and price indexes suggested a weakening of food price momentum.
“Risks to the inflation outlook are balanced,” the statement said.
Pakistan’s rate remained on the high side until earlier this year, at 13.25%, primarily to contain inflation, before a series of cuts to spur economic activity amidst the pandemic.
“The MPC noted that since the last meeting in September, the domestic recovery has gradually gained traction, in line with expectations for growth of slightly above 2 percent in FY21, and business sentiment has improved further.”