Monetary Policy Committee has decided to keep the Policy Rate unchanged at 5.75%
State Bank of Pakistan released the Monetary Policy Statement today, giving the decision of keeping the policy unchanged. The statement said that, “Following detailed deliberations and taking into consideration the above mentioned developments, the Monetary Policy Committee has decided to keep the policy rate at 5.75%”.
Highlighting the economy, the Statement begins by stating that “Macroeconomic environment remains conducive to growth without impacting headline inflation. Favorable initial estimates of major crops, a healthy growth in credit to private sector and growing productive imports all indicate solid gains in the real sector.” The statement further mentions that, inflation decelerated during the first two months of Fiscal Year 2018. However, members maintained their reservations regarding challenges arising from External Front and expansionary fiscal policy.
Commenting on the manufacturing sector, MPS mentioned the broad-based and healthy growth of 5.7 percent for Fiscal Year 2017, compared to earlier estimates of 4.9 percent, has been welcome development. According to State Bank, manufacturing activity is expected to pick up as development expenditure continues to increase emanating from CPEC related investments. The policy considering all of the macro and micro economic indicators, expects positive future outlook of the economy. The Central Bank expects the economy to grow at an annual target of 6.0 percent for the Fiscal Year 2018.
Extrapolating on inflationary data, MPS expects no major disruption in supply side to offset the desired growth in inflation for coming few months, reason being steady stock supply of sugar and wheat. However, on the contrary, inflationary pressure continues to increase from Core Inflation (NFNE), maintaining its higher level of 5.6 percent during the first two months of Fiscal Year 2018.
The Central Bank expects CPI Inflation to remain well below the target of 6.0 percent during FY18.
The complete Statement can be accessed here.