Tuesday , April 23 2019

Pakistan central bank to stay cautious on inflation

Bloomberg

Pakistan’s central bank sees inflation behaving well in the next financial year beginning July, but will stand ready to use monetary policy tools after the most aggressive interest rate tightening in Asia last year, its governor said.
Consumer price growth will be anchored by low food inflation, State Bank of Pakistan Governor Tariq Bajwa said in an interview. While inflation accelerated to 8.2 percent in February, the highest since 2014, the central bank doesn’t see average inflation for next year breaching double digits.
“I’ll not be surprised if the inflation rate for the next year continues to be more or less the same, and starts coming down end of next fiscal year,” said Bajwa, who delivered 450 basis points of interest rate hikes in the past 16 months. “We have also shown that taming of the inflation rate is one of our priorities and we will continue to move as far as policy rate is concerned.”
The monetary policy tightening was also aimed at containing the financial blow outs from Pakistan’s twin current-account and budget deficits, which limited the nation’s ability to repay debt and pay for much-needed imports. Prime Minister Imran Khan’s government is in talks for a bailout package from the International Monetary Fund, in addition to securing soft loans from friendly nations to bridge the financing gap.
The crisis has already caused economic growth to slow, while fanning inflation.

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