Excerpt from the statement by the Central Board of Directors of SBP:
The SBP increased the policy rate by 50 basis points each in September and November 2013 mainly on account of two concerns. One was the continued deterioration in the balance of payments position while the other was worsening of inflation outlook. Nevertheless, due to earlier reductions in the policy rate and settlement of energy sector circular debt, credit to private businesses and economic activity has shown early signs of recovery. Similarly, fiscal consolidation efforts have been initiated, which are expected to gradually alleviate pressure on monetary aggregates.
Although there are some risks to the balance of payments position due to uncertainty surrounding expected foreign inflows, expected increase in inflation is slightly lower than anticipated earlier. In view of the above, the Board of Directors of SBP has decided to keep the policy rate unchanged at 10.0 percent.