Higher food prices could raise average headline inflation in FY23.
SBP maintains policy rate at 15pc. The State Bank of Pakistan’s Monetary Policy Committee (MPC) decided to maintain the interest rate at 15 percent for the next seven weeks.
According to a statement issued on Twitter, the MPC noted the continued deceleration in economic activity as well as the decline in headline inflation and the current account deficit since the last meeting.
“Based on currently available information, the MPC was of the view that the existing monetary policy stance strikes an appropriate balance between managing inflation and maintaining growth in the wake of the floods,” the statement added.
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Quoting the currently available information, the central bank noted that growth could fall to around 2 percent in FY23, compared to the previous forecast of 3-4 percent. “Despite lower demand-side pressures, higher food prices could raise average headline inflation in FY23 somewhat above the pre-flood projection of 18-20%,” it added.
“With pressures from higher food and cotton imports and lower textile exports largely likely to be offset by slower domestic demand and lower global commodity prices, the current account deficit in FY23 is expected to remain close the previously forecast 3% of GDP,” it concluded.
