The Monetary Policy Committee (MPC) voted today at its meeting to keep the interest rate at 22 percent, according to a statement released by the State Bank.

According to the statement, the decision was made after considering the most recent statistics on inflation, which showed a decreasing trend after inflation reached a peak of 38 percent in May and a low of 27.4 percent in August. According to the State Bank, rising oil costs on the international market have lately been passed on to consumers through adjustments in the official price of energy. However, predictions indicate that inflation will continue to drop, particularly this year. Since inflation will start to decline in the second half of 2018, the real interest rate will continue to be positive.

According to the statement, the recent administrative actions taken against speculative activity on the commodities markets as well as the anticipated decrease in supply restrictions brought on by increased agricultural production and foreign exchange would all contribute to the downward trend in inflation.

Four significant changes since the July meeting were claimed to have been addressed in the choices made at the Monetary Policy Committee meeting, including updated cotton statistics, better raw material circumstances, and others. Based on satellite data showing improved crops, the agriculture picture has improved. Similarly, the meeting was informed that the current account deficit increased in July after being low for the previous four months, which is because of import restrictions, and has since risen to a level of $90 per barrel. The results of the current relaxation are only partially reflected in this.

The meeting was informed, according to the statement, that the outcomes of recent administrative actions to increase the accessibility of staple foods and stop unlawful activity on the foreign exchange market had begun to materialize. The committee said that these actions had contributed to a reduction in the difference between interbank and open market exchange rates.

The Monetary Policy Committee stated that it will continue to assess the risks of an inflationary situation and, if required, take appropriate action to meet the goal of maintaining stable prices, according to the statement. According to the State Bank, the committee also emphasized the need to sustain long-term fiscal policies to restrain aggregate demand. They said that taking this action is essential to achieving the medium-term goal of 5-7 percent inflation by the end of the fiscal year 2025 and bringing down inflation on a sustained basis.

According to the Monetary Policy Committee, prospects for the agricultural sector have improved, flood concerns have diminished, and cotton production has nearly doubled compared to last year. This increase in import volume was accompanied by a moderate increase in sales of key raw materials like cement, fertilizers, and petroleum products.

According to the committee, the external sector's current account balance revealed an 809-million-dollar deficit in July 2023, but it had improved over the previous four months. The current account deficit for FY2024 is likely to stay within the prior predicted range, according to the Monetary Policy Committee. Energy prices and base adjustments, according to the Monetary Policy Committee, are anticipated to cause inflation to rise in September. However, inflation is predicted to fall in October, and the downward trend will continue.

In contrast to predictions, the Monetary Policy Committee held the interest rate steady, according to Mohammad Sohail, CEO of Top Securities, who spoke to News agency. Additionally, the central bank is confident about the value of the rupee, the measures taken to combat smuggling, and the current year's agricultural production, so the real interest rate will continue to be positive. The danger will not diminish.

The State Bank has kept interest rates in a downward trend, according to economist Ammar Khan, particularly since the currency supply remains constrained. Fahad Rauf, head of research at Ismail Iqbal Securities, on the other hand, stated that the bank's choice is consistent with what we anticipated. I believe it was the right choice because the economy is not showing significant symptoms of problems, and the interest rate increase may have had a small positive impact on inflation, he added.

According to Fahad Rauf, the government's financial imbalance would grow as a result of the interest rate hike, and the banking sector would face credit problems. On June 27, the State Bank and the International Monetary Fund (IMF) inked a contract. In light of this, the interest rate was raised to 22%, and it was then declared that the rate would remain the same at the meeting on July 31.

In a press conference, State Bank Governor Jameel Ahmed announced the decision to keep the interest rate at 22 percent. He said that the Monetary Policy Committee examined the minutes from the previous sessions, with the last normal meeting taking place on June 12 and the following day being a special meeting on June 26. In June, it took place.

He stated that the committee had considered the changes in the economy that had taken place between the two sessions and had chosen to keep the interest rate at 22%. He had stated that the Monetary Policy Committee also looked at changes in inflation, externalities, and annual CBI inflation because May's inflation rate was 38% while June's was 29.4%. Inflation of 29.2 percent is anticipated for the fiscal year 2023, according to Governor State Bank.

The committee has insisted that inflation will be brought down to 5 to 6 percent before the end of fiscal 2025, for which we are on the right track. He said that the committee also noted that inflation was 29.4 percent in May but that it will gradually decline over the next few months.

It should be remembered that from April 2022 to July 2022, the State Bank increased the interest rate by 12.25 percentage points; this rise has not altered. The State Bank had stated in June that the inflation rate had decreased this month after reaching a high of 38% the previous month.

On the other hand, it was justified by adding 100 basis points to the fact that there has been a minor increase in inflation before the month's end, in an emergency meeting to achieve an agreement with the IMF. because of the discussions Pakistan and the IMF had. The agreed-upon Memorandum of Economics and Financial Policies (MEFP) had stated that until inflation was obviously on the downtrend, additional action had to be taken at the next meeting of the Monetary Committee.