KARACHI: A senior SBP official expected inflation to gradually drop and the economy to improve.
On Saturday’s podcast, SBP Monetary Policy Department Director Fida Hussain highlighted that this anticipation was the bank’s reason for maintaining its policy rate last month.
On July 31, the SBP’s Monetary Policy Committee (MPC) kept the policy rate at 22%.
Several reasons affected the MPC’s decision. First, expected inflation reduction in 2024.
“Second, the positive trajectory of Pakistan’s economy, attributed to improved investor confidence due to recent developments,” Hussain remarked.
The podcast explains the decision, the economic outlook, and recent events.
After Pakistan and the IMF reached a Stand-By Arrangement (SBA), the MPC made its first policy announcement.
Changes following the June 2023 monetary policy announcement were discussed.
Moreover, The podcast noted that these changes affect the SBA agreement, the government budget for 2023-2024, global commodities and fuel prices, and global economic stability.
Market mood and foreign exchange reserves have improved since the IMF deal. While, Global commodity prices are stabilising, indicating a positive economic climate.
According to Hussain, business and consumer inflation expectations are falling, matching the MPC’s projection.
Recent price changes in major sectors including fuel, electricity, and gas raised worries. Hussain said the MPC considered these modifications’ effects on inflation while making decisions.
The programme discussed the exchange rate and inflation impacts of removing import restrictions.
The high policy rate of 22% has suppressed domestic demand, reducing the potential pressure on the foreign exchange rate from import restrictions.
Real interest rates and their effects on economic behaviour closed the podcast. Positive real interest rates encourage saving and discourage borrowing, lowering consumption and inflation.
The episode analyses the latest monetary policy decision’s domestic and global components.
