Pakistan Central Bank Holds Steady: Interest Rates and Economic Outlook
Pakistan's central bank maintained its interest rate at 11%, attributing the decision to rising energy prices which have aggravated inflation forecasts. This move surprised analysts who expected rate cuts. Factors like trade deficits, economic reforms under an IMF program, and flooding impacts were also considered.
Pakistan's central bank surprised analysts by holding its key interest rate steady at 11% on Wednesday, citing a worsened inflation outlook due to unexpectedly high energy prices, particularly gas. This decision contrasts with expectations from a Reuters poll where all analysts anticipated a cut.
The Monetary Policy Committee highlighted that the trade deficit is expected to expand further by the fiscal year ending June 2026, influenced by increased economic activity and global trade slowdown. The central bank is navigating economic reforms under a $7 billion IMF program and facing recent monsoon-driven flooding challenges.
The State Bank reported that inflation, while slowing, needs careful monitoring. Growth forecasts remain below government targets, and the economy's stability is fragile. The central bank's cautious approach reflects the volatile currency and external balance pressures amidst ongoing global and domestic challenges.
(With inputs from agencies.)
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