SBP aiming for predictable, transparent monetary policy

Published May 21, 2021
The SBP said it decided to follow international best practices to manage expectations of economic agents. — APP/ File
The SBP said it decided to follow international best practices to manage expectations of economic agents. — APP/ File

KARACHI: The State Bank on Thursday said that it will begin announcing the half-yearly schedule of Monetary Policy Committee (MPC) meetings on a rolling basis in a bid to make the policy more predictable and transparent.

The SBP said it decided to follow international best practices to manage expectations of economic agents, noting that many central banks across the globe rele­ase the schedule of MPC meetings in advance.

“This practice is consistent with the objective of reducing uncertainty around monetary policy decision-making,” said the SBP.

In this regard, the next four meetings of the MPC will be held May 28, July 27, Sept 20 and Nov 26.

A minimum of six MPC meetings are scheduled every year. In addition, the MPC can convene emergency meetings during the intervening period, if required.

In 2020, to make monetary policy communication more effective, SBP enhanced interactions with analysts, media, various business forums, academics, and investors through regular briefing sessions with its senior management.

In January 2021, in light of the extreme uncertainty caused by the Covid-19 pandemic, the MPC decided to provide forward guidance on monetary policy for the first time to facilitate policy predictability and decision-making by economic agents.

“Clear communication helps to make central banks more transparent, and thereby contributes to enhancing their accountability,” said the SBP. “Central bank communication and transparency are also key for effective transmission of monetary policy decisions.

The SBP has over the years been seeking to modernise and increase transparency in the monetary policy making process, in line with international best practices, it added.

In 2005, SBP began releasing Monetary Policy Statements. In 2009, it was decided to hold at least six meetings on monetary policy (January, March, May, July, September and November). It was also decided to hold a press conference to announce the monetary policy decision in the months of January and July, to supplement the Monetary Policy Statement.

In 2015, after the introduction of an independent Monetary Policy Committee through an amendment in the SBP Act, two major changes were introduced to increase transparency. First, the SBP started publishing minutes of the MPC meetings on its website. Second, the voting pattern of the MPC members was also made public.

“The SBP remains committed to continue modernizing its communication in line with international best practices and evolving domestic circumstances,” it added.

Published in Dawn, May 21st, 2021

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