SBP maintains policy rate at 7pc

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Observer Report

The State Bank of Pakistan on Friday announced the policy rate will be maintained at 7% in a bid to support economic recovery.

The decision was taken at a meeting of the Monetary Policy Committee, following which a statement was issued by the central bank.

The committee noted that the “current stance of monetary policy remains appropriate to support economic recovery while keeping inflation expectations well-anchored and maintaining financial stability”.

SBP said that the committee reviewed the recent rise in inflation and concluded it was “primarily driven by supply side factors and saw little signs of demand led inflation”.

The central bank committee expects that as this “temporary increase in inflation”, that is a by-product of “administered prices” subsides, “inflation should fall to the 5-7% target range over the medium-term”.

It said that in the absence of “unforeseen developments”, it is expected the monetary policy settings to “remain broadly unchanged in the near term”.

The MPC foresaw that as economic recovery stabilises and makes a return to full capacity possible, the policy rate in the future will be “measured and gradual to achieve mildly positive real rates”.

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