KARACHI (Agencies) - State Bank of Pakistan has decided to leave its discount rate, the key policy rate, unchanged at 15 per cent for the rest of the quarter, SBP Governor Syed Salim Raza said on Saturday. The central bank raised interest rates by 2 percentage points to 15 per cent on November 12, the same month it signed a $7.6 billion loan with the International Monetary Fund to stave off a balance of payments crisis. The Bank kept its benchmark interest rate unchanged, after five increases in the past 18 months, as inflation eased from a 30-year record. Salim Raza disclosed that the SBP Central Board of Directors has decided that the Bank will issue monetary policy statement on quarterly basis. Unveiling the Monetary Policy Statement, at a Press conference at State Bank's Head Office here, Salim Raza said that the next monetary policy statement will be issued by the end April 2009. SBP maintained its discount rate for commercial lenders at 15 per cent, Salim Raza said in Karachi after releasing his first semi-annual monetary policy statement since taking charge on January 2. "Inflation is moving in the right direction and coming down," Raza said. "But it will take time and is difficult to shake off." Pakistan will review the interest rate every quarter rather than every six months, he said. "Any cut in rates at this time would have unhinged the government's economic stabilisation policy," said Zainab Jabbar, group chief economist at IGI Finex Securities Ltd. in Karachi. "We expect a cut later in the year." The Bank promised the IMF as part of the rescue package to raise borrowing costs if foreign reserves drop too low. Higher borrowing costs have helped tame inflation, which accelerated to near a three-decade high of 25 per cent in October. Consumer prices increased 23.34 per cent in December and inflation is forecast to average 22 per cent in the fiscal year ending June 30, according to Dec 6 SBP report. Rupee plunged 22 per cent in 2008, the current account deficit widened to a record and the fiscal deficit reached a 10-year high. The crisis mounted after the Pakistan Peoples Party-led government, which came to power in March, was paralysed for almost six months on political wrangling. Economic growth, which averaged 6.8 per cent in past five years, is expected to weaken to 3.7 per cent this fiscal year from 5.8 percent last year, the Governor said. Budget deficit was 1.9 per cent of gross domestic product in the first six months of this fiscal year started July 1, after the government reduced development spending and cut subsidies on oil, according to the report. The shortfall in the July-to-December period is 'consistent with annual fiscal deficit target of 4.2 per cent', the report said. Pakistan has pledged to reduce its budget deficit from a 10-year high of 7.4 per cent last year as part of the IMF loan conditions. Raza said that extent of risks and vulnerabilities, which the economy had faced during 2008, have moderated to but we would need to remain watchful of the emerging risks and challenges. He pointed out that factors such as the vulnerability of the external sector due to high oil and other commodity prices; persistence of high imports and weak prospects of foreign investment, have all moderated considerably owing to improvements related to each area. Raza said that progress has been made with inflation, over the last four months, but it is very stubborn in the core inflation (i.e. non-food and non-energy). The slow improvement in core inflation, while it has a structural element, is primarily owing to the fact that non-fuel and non-food items, such as wages and rents and fares etc. continue rising after the supply side shocks recede. This more entrenched trend is because inflationary expectations remain; for the good reason that we have had 12 months of high inflation and several preceding years during which the potential for inflation breaking out in a substantial way was being developed, he added. He said that by the end of FY09 there will be some reduction in both the fiscal and external current account deficits relative to FY08. However, not only is the expected magnitude of these deficits high but also there are risks of slippages. This signifies that the demand pressures have not completely dissipated despite a slowdown in economic activity, he said and added that the high expected average CPI inflation of 20 per cent for FY09 (significantly higher than the FY09 target of 11 percent) and its persistence, reflected by core inflation measures, clearly reflect the risk on this front. To mitigate the implications of these risks it is important to continue with the current monetary policy stance, he said and added, therefore, the SBP has decided to keep the policy discount rate unchanged at 15 per cent. While elaborating on the more recent liquidity issues, he said that the present pressure on interest rates would have come irrespective of the discount rate as we have seen an unprecedented fall in banking liquidity post June, between July 1 and Jan 10, deposits have shrunk by 3.4pc, or Rs 128 billion, while total credit has grown by 11pc or Rs 500 billion, putting a strain of 628 on the system, or shrinking available liquidity by about 14pc.