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The State Bank of Pakistan (SBP) on Monday held its key rate at 22 per cent for the fifth policy meeting in a row, the Governor of the State Bank of Pakistan said.
Addressing a press conference in Karachi, SBP Governor Jameel Ahmad said the central bank’s Monetary Policy Committee (MPC) had estimated the full year average inflation to be between 23-25 pc for the year.
He also noted improvements in external accounts due to the International Monetary Fund (IMF) tranche release.
Previously, Pakistan Bureau of Statistics (PBS) data showed inflation in December hit another high of 29.7pc, a slight increase from November.
The SBP policy rate was raised to an all-time high of 22pc in June and has stayed unchanged for the last four review meetings.
Additionally, the SBP’s foreign exchange reserves stood at $13.34 billion in the week ending January 19th after the central bank confirmed it had received the latest tranche release of $700 million from the IMF, in addition to the UAE confirming the rollover of its two deposits of $1bn placed with the central bank for another year.
After completing the first review of the Stand-By Arrangement (SBA) for Pakistan, the IMF issued a press release on Jan 11 with the observation that inflation remains elevated, although, with appropriately tight policy, this could decline to 18.5pc by the end of June.
Money market experts said this remark was enough to understand the IMF’s direction for the interest rate.
Overall, according to a survey of key market participants conducted by Topline Securities, 68pc expected the policy rate to remain unchanged at 22pc, while the remaining 32pc anticipate a policy rate cut.
This is in spite of a surprise fall in T-Bill yields by 50-62bps in the recent auction, which indicated a rate cut in the near future.
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