State Bank of Pakistan has announced that it will maintain the policy rate at 7% despite concerns about rising inflation. The central bank has justified this decision by citing a preference for controlling inflation amid expectations of a decrease in inflation rates in October and a subsequent trend of moderation in inflation.
During September, there were notable increases in inflation, but the central bank anticipates a decline in inflation in October, with a continued decreasing trend thereafter. This move comes as a response to concerns regarding the persistent surge in prices in recent months.
The current account deficit, which had been in surplus for the past four months, turned into a deficit in July. This shift is attributed to increased imports of petroleum products, fertilizers, and cement, among other essential commodities. However, there has been a moderate increase in income from exports due to improved agricultural prospects.
The agriculture sector has shown promising signs of improvement, with a growth rate of 27.2% recorded in the fiscal year 2022. The government plans to increase tax collections, particularly from the extremely poor segment of the population, while also aiming to reduce losses in state-owned enterprises through restructuring and reforms. These measures are expected to help reduce inflation and achieve sustainable economic growth.
In the coming months, the government aims to continue its efforts to combat inflation. Despite recent fluctuations in global oil prices and adjustments in domestic energy tariffs, the government is determined to follow the path of inflation moderation, especially starting from the second half of this fiscal year.
This decision to maintain the policy rate and address inflation concerns is part of a broader strategy to stabilize the economy, improve agricultural productivity, and manage price fluctuations in essential goods and commodities through various administrative measures.
Governor of the State Bank of Pakistan, Jamil Ahmed, chaired the Monetary Policy Committee meeting that discussed these matters. The committee is optimistic that this strategy will contribute to a positive real interest rate environment, which will help bolster economic stability. It also expects that the favorable conditions in the agriculture sector and efforts to curb speculation in markets will further reinforce the objective of containing inflation.
Pakistan’s central bank has decided to keep its policy rate steady at 7% despite concerns about inflation. The decision is based on the expectation of a decrease in inflation rates in the coming months and aims to stabilize the economy while promoting sustainable economic growth and improved agricultural productivity.