The State Bank of Pakistan's monetary policy committee decided to keep the policy rate unchanged at 5.75%.
The Pakistani central bank said inflation expectations in the current fiscal year remain "well anchored," largely due to the near-absence of any major supply side pressures. It noted that domestic demand, which is showing signs of picking up due to rising real incomes in a low interest rate environment since the 2014 fiscal year, will define the underlying trend of headline inflation in the 2018 fiscal year, barring major cost shocks.
The central bank added that this prudent monetary stance translated well into low and stable market interest rates, which incentivized the private sector to borrow from commercial banks. Private sector credit increased by 349 billion rupees from July 2016 to February 2017, compared to 267 billion rupees in the year-ago period.
The central bank said real economic activity continues to gather pace on the back of better agricultural output, an increase in key large-scale manufacturing sectors and a healthy uptick in private sector credit. It expects GDP growth to further improve in the 2017 fiscal year.
As of March 24, US$1 was equivalent to 104.82 Pakistani rupees.