ISLAMABAD: The State Bank of Pakistan (SBP) is likely to hike the key policy rate again on Monday (July 31) to rein in inflation, in line with the conditions of the International Monetary Fund (IMF).
The IMF urged Pakistan in a staff report earlier in July to continue its monetary tightening cycle, a week after the lender approved the new bailout arrangement with Pakistan to avert a debt default.
Out of 16 analysts, nine predict that the central bank will raise the key rate by 100 basis points (bps) to 23% at its policy meeting next week. One analyst expects a smaller 50 bps increase, while six analysts expect no change.
The SBP has raised its key policy rate by 12.25 percentage points since April 2022, mainly to curb soaring inflation.
The state bank held rates steady in June, stating that inflation had peaked at 38% in the preceding month. However, before the end of the month, it raised rates by 100 bps at an emergency meeting to secure IMF funds, citing a “slightly deteriorated inflation outlook.”
In the Memorandum of Economic and Financial Policies (MEFP) resulting from its talks with the IMF, Pakistan said it stands ready to consider further action at the next monetary policy committee meeting and subsequent ones until inflation and inflation expectations are on a clear downward path.
In a statement earlier today, the SBP announced that the Monetary Policy Committee (MPC) will meet on Monday to decide on key policy rates.
