Pakistan Holds Key Rate at 6% to Steady Rupee, Contain Inflation

  • Decision is first by nation's new monetary policy committee
  • Panel acts after consumer prices climbed 3.19% in December

Pakistan’s central bank left interest rates unchanged for a second straight meeting to support a currency that’s weakening as inflation accelerates.

The State Bank of Pakistan kept the target policy rate at 6 percent, Governor Ashraf Mahmood Wathra said Saturday at a briefing in Karachi. Six of seven economists in a Bloomberg survey predicted the rate would be unchanged. One forecast a cut to 5.5 percent.

“The central bank will remain cautious” Hassan Raza, head of research at Alfalah Securities Ltd. in Karachi, said by phone before the decision. “If we cut rates and the gap between inflation and the interest rate increases, it will increase pressure on currency.”

The decision is the first by Pakistan’s new monetary policy committee, which was set up on the recommendation of the International Monetary Fund as it pushes for more central bank autonomy. Analysts also expect neighbor India to keep rates unchanged at a review on Tuesday as the China-led turmoil roils markets worldwide.

Pakistan’s consumer prices rose 3.19 percent in December, the fastest pace in 10 months, weighing on stocks and the currency. While the rupee’s 0.2 percent decline this year is still one of Asia’s best performances, it’s overvalued by as much as 20 percent, the IMF said in November.

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