The State Bank of Pakistan (SBP) has decided to maintain the policy rate at 7 percent, according to statement issued by the bank on Monday.
The Monetary Policy Committee (MPC) of the bank during its meeting held in port city of Karachi, noted that since the last meeting in September, the domestic recovery has gradually gained traction, in line with expectations for growth of slightly above 2 percent in Fiscal Year 2020-21, and business sentiment has improved further. Nevertheless, there are risks to the outlook, the statement added.
The recent rise in Covid cases in Pakistan and many other countries presents considerable downside risks, it added.
On the upside, while it could take some time to fully implement worldwide, there has been recent encouraging news on vaccine development.
On the inflation front, recent out-turns have been on the higher side, primarily due to increases in food prices.
However, these supply-side pressures are likely to be temporary and average inflation was expected to fall within the previously announced range of 7-9 percent for FY21. Taken together, risks to the outlook for both growth and inflation appear balanced