Monetary policy: how Pakistan's key interest rate has moved over time

The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) on Monday announced to keep the key policy rate unchanged at 9.75%.

The decision was largely in line with market expectations, as well as with the forward guidance provided in the last monetary policy statement.

This was also the first monetary policy since July 2021 when the SBP decided to maintain the status quo. In its previous three meetings, it had raised the interest rate.

Business Recorder looks at how interest rates have moved since January 2016, peaking at 13.25% in mid-2019, and hitting a low of 5.75% in 2017.

In its latest monetary policy statement, the SBP said that recent economic growth indicators are appropriately moderating to a more sustainable pace.

"While year-on-year headline inflation is high and will likely remain so in the near term due to base effects and energy prices, the momentum in inflation has slowed with month-on-month inflation flat in December compared to a significant rise of 3 percent in November," it said.

"Looking ahead, and against the backdrop of these developments that have improved the inflation outlook, the MPC was of the view that current real interest rates on a forward-looking basis are appropriate to guide inflation to the medium-term range of 5-7 percent, support growth, and maintain external stability. If future data outturns require a fine-tuning of monetary policy settings, the MPC expected that any change would be relatively modest," it said.

Topline Securities, in a note after the monetary policy announcement, said that in the secondary market yields on T-bill and PIBs came down sharply by 25-30bps amid hope that further increase in rates may not happen in near term.