The State Bank of Pakistan has chosen to keep the policy rate at 7% for the next two months, according to Dr Reza Baqir, the central bank’s governor.

“The Monetary Policy Committee (MPC) agreed to keep the policy rate at 7% at its meeting on July 27, 2021,” the SBP stated in a statement released following the meeting.

The MPC examined important developments and prospects in the real, external, and fiscal sectors, as well as the implications for monetary conditions and inflation, in making its decision.

Baqir, speaking at a news conference with SBP officials, stated that the central bank has chosen to hold the policy rate for the fifth time in a row.

According to him, the policy rate is lower than the rate of inflation. “This is referred to as a negative interest rate by economists,” he explained.

“A focus on growth is the rationale for maintaining the real interest rate negative,” the SBP governor explained.

According to Baqir, Pakistan’s current account deficit is at its lowest level in ten years.

Meanwhile, the SBP stated in a statement that the MPC has been pleased by the sustained domestic recovery and better inflation outlook since its previous meeting in May, citing the recent fall in food prices and core inflation.

According to the statement, consumer and business confidence have reached multi-year highs, while inflation expectations have fallen. As a result of these developments, growth is expected to increase from 3.9 percent in FY21 to 4-5% this year, with average inflation moderated to 7-9 percent from recent higher out-turns.