The State Bank’s Monetary Policy Committee voted 7-3 to keep the policy rate at 11.5 percent (Express Tribune).
The position
| | | |—|—| | Policy rate | 11.5pc — unchanged | | Inflation, August | 11.1pc | | Inflation, July | 9.2pc | | Vote | 7-3 | | GDP growth forecast, FY27 | 3.5-4.5pc, retained |
The committee expects inflation to ease gradually toward the upper end of the 5-7 percent medium-term target by June 2027.
What it said
That “the existing monetary policy stance [is] appropriate for bringing inflation towards the 5-7% medium-term target range” — while acknowledging that “uncertainty had increased significantly because of the worsening geopolitical environment”.
Risks listed: commodity price volatility, tariff adjustments, supply disruptions, and food prices amid El Niño.
The three dissenting votes
A 7-3 split is not a comfortable hold. With the policy rate at 11.5 and inflation at 11.1, the real rate is close to zero, and three members evidently thought that was too loose.
The case for the majority is the one this newspaper set out yesterday: the inflation arriving now is imported through oil, and a policy rate suppresses domestic demand without touching the price of crude. Raising into a supply shock buys little and costs growth.
The case for the three is that expectations do not care where inflation comes from.
What the committee is betting on
That oil recedes. Its forecast returns inflation to 5-7 percent by June 2027, and that path requires the commodity shock to unwind rather than compound.
Brent was above $107 on Monday. Petrol here rose again today to Rs380.24.
What is not established
The names and reasoning of the three dissenting members have not been published. The MPC did not give forward guidance on what would trigger a move, and no revised inflation forecast for FY27 was reported.
[Image: The Express Tribune]
