KARACHI:
The cost of bank lending, known as the key policy rate, was set to remain steady at 22% by the central bank on Monday.
Today was supposed to be the first time the SBP reviewed its key policy rate since the IMF began its new loan program. The goal was to figure out if the existing, historically high rate of 22% is sufficient to control inflation and sustain economic growth, or if it has to be raised any further.
The Governor of the State Bank of Pakistan (SBP), Jameel Ahmad, addressed the media and said that the rate was being kept at the same level despite the fact that inflation dropped in June from the six-decade high of 38 percent seen in May of this year.
The governor of the central bank predicted an inflation rate of 20-22% for fiscal year 2024-2025.
In addition, he disclosed that he expects the economy to increase by between 3% and 5% in FY2024-2025.
He predicted that inflation will fall gradually in the first half of FY2024 and then fall quickly in the second half of the fiscal year.
It is worth noting that inflation as measured by the Consumer Price Index (CPI) in Pakistan is expected to decelerate slightly on a year-over-year (YoY) basis, with a low point expected to be reached in December 2022.
According to a forecast by AHL, headline inflation on a YoY basis is expected to fall in the first quarter of the fiscal year 2024, falling to its lowest level since December 2022, when it was recorded at 24.5% YoY.
AHL’s analyst Sana Tawfik predicted that inflation would slow to 26.4% in July 2023 from the 29.4% seen in the previous month. This would be lower than the 24.9% seen in the same period in 2022.
In July 2023, we may anticipate a continuation of monthly inflationary pressures, with a projected MoM increase of 1.9%. In particular, the recent increase in electricity prices is widely anticipated to have a major effect on the rate of inflation measured each month.
An increase in core inflation to 21.2% year-over-year is forecast for July 2023.
High food and energy prices, the potential effects of fiscal measures, and the susceptibility of a weakened currency are seen as the primary concerns to total inflation going forward.
