“With recent inflation developments in line with expectations, domestic demand beginning to moderate and the external position showing some improvement, the MPC felt that it was prudent to take a pause at this stage,” it said.

This was the first MPC announcement after the government on Friday appointed Jameel Ahmad the new governor of the central bank for a period of five years.

Background

Most analysts expected no change in the monetary policy, which came at a time of rising inflation.

The Consumer Price Index (CPI)-based inflation hit 24.9% on a year-on-year (YoY) basis in July 2022, a 14-year high. The weekly review of the sensitive price index (SPI) on Friday also showed a record increase in inflation up to 42.31% on a year-on-year basis in August, data shared by the Pakistan Bureau of Statistics (PBS) showed.

Pakistan’s current account deficit for June stood at $2.28 billion, up 59% compared with the figure in May when it stood at $1.43 billion.

Meanwhile, the government also lifted a ban on imports on the insistence of international organisations, but finance minister Miftah Ismail insisted that enhanced regulatory duties would control the inward flow of non-essential shipments.

The import ban had proved crucial in narrowing the rising trade deficit, which shrank by 18% YoY and 47% MoM during the month of July 22.

In the previous monetary policy meeting held on July 7 2022, the committee increased the benchmark policy rate by 125 basis points (bps) to 15%. In addition, it linked the interest rates of the Export Finance Scheme (EFS) and Long-Term Financing Facility (LTFF) with the policy rate and offered a discount of 500 bps relative to the policy rate to incentivise exports.