The State Bank of Pakistan (SBP) on Monday decided to maintain the current key policy rate unchanged at 7 percent for the next two months as its Monetary Policy Committee (MPC) met in Karachi.

Announcing the decision which had been expected by many financial experts, the State Bank in a tweet said the decision was taken a meeting chaired by SBP Governor Reza Baqir.

https://twitter.com/StateBank_Pak/status/1308016754489163783 

In a detailed statement, the central bank said, “The MPC noted that compared to the time of the last meeting in June 2020, business confidence and the outlook for growth have improved. This reflects the decline in Covid-19 cases in Pakistan and the easing of lockdowns, as well as the timely stimulus provided by the Government and SBP.”

However, it admitted that inflation would rise. “At the same time, the forecast for inflation has risen slightly, primarily due to recent supply side shocks to food prices. Average inflation is now expected to fall within the previously announced range of 7 – 9 percent during FY21, rather than marginally below.

The central bank also claimed that the series of targeted measures undertaken by SBP since the Covid-19 outbreak had injected significant liquidity and further lowered funding costs for many businesses and households.

“Together, these monetary measures have injected an estimated stimulus of Rs. 1.58 trillion, or about 3.8 percent of GDP, in the cash flow of businesses and households.”

Since the coronavirus pandemic outbreak, the interest rate has been slashed by 6.25 percent from the previous level of 13.25 percent to 7 percent.