Mohsin Siddiqui (Chief Reporter)

The eagerly anticipated announcement of the key policy rate by the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) is imminent, with most analysts predicting a continuation of the status quo.

SBP Governor Jameel Ahmed is set to chair the MPC meeting, where economic indicators will be scrutinized to determine the course of the policy rate. A statement is expected to follow the meeting.

Analysts contacted earlier anticipate no change in the key policy rate due to the upward trajectory of the inflation rate. Brokerage house Arif Habib Limited (AHL) released a report last week, projecting the maintenance of the policy rate at 22% during this meeting.

AHL attributed this forecast to several factors, including the substantial base effect, stabilization of global commodity prices, support from the stability of the PKR against the USD, and efforts to curtail the current account deficit.

In the previous meeting on October 30, the MPC of the SBP opted to keep the key policy rate unchanged at 22%, citing considerations of the latest inflation trends. The committee reiterated its view that the real policy rate is significantly positive on a 12-month forward-looking basis, deeming it appropriate to bring inflation down to the medium-term target of 5 – 7% by end-FY25.

However, the MPC acknowledged this outlook relies on continued fiscal consolidation and timely realization of planned external inflows.

It’s worth mentioning that, as part of the IMF agreement, the government has committed to considering further action in upcoming MPC meetings until inflation expectations are on a clear downward path.

Despite a last-minute deal with the IMF providing relief, the economy grapples with an acute balance of payment crisis, depleted foreign exchange reserves, historically high inflation, and unprecedented currency devaluation.