KARACHI: The State Bank of Pakistan (SBP) on Friday left the policy rate unchanged at 7% to act appropriately as the current growth rate is in reverse risk even though inflation expectations are good. Are intact.
“Since the last meeting in November, domestic recovery has gained some momentum; current growth in FY21 is in reverse risk of slightly exceeding 2%,” the SBP said in a statement. “On the inflation front, the recent results are also encouraging, suggesting that food prices are falling and inflation is still the main crisis.”
The SBP expects inflation to fall within the previously announced limit of 7-9% for FY21. “The current favorable monetary policy stance has been in line with inflation expectations and in support of neoliberal recovery to maintain financial stability,” he said.
SBP Governor Raza Baqir said the inflationary pressures were due to rising utility prices and rising international oil prices. “But the trend is temporary,” Baqir told a news conference.
“Any change in policy in the future will be gradual,” he said. The SBP governor dismissed the notion that the policy stance was a step towards reviving the International Monetary Fund’s program.
“There is a misconception among traders and markets that going to the IMF program means a sudden reversal of the monetary policy stance,” he said.
The current account is now in surplus due to the implementation of market-based exchange rate system. The بینک 7 billion to 13 13 billion increase in the central bank’s foreign exchange reserves is not due to foreign debt.
For the first time, the SBP provided guidance for moving forward as it expects inflation to move towards the 5-7% target range over the expected period.
“Moving forward, the guidance tool will help us build confidence, avoid surprises, ensure economic stability and reduce future uncertainty in markets and the business community,” Baqir said.
The monetary stand is in line with market expectations after the SBP lost a total of 625 basis points to buy growth that sank during the Corona virus lockdown last year. During the last financial year 2019/20, the economy contracted 0.4%.
SBP sees ‘considerable uncertainty’ around Outlook due to COVID-19. “In the absence of unexpected developments, the MPC [Monetary Policy Committee] Monetary policy settings are not expected to change in the near future. “As recovery becomes more sustainable and the economy returns to its full potential, the MPC expects that any adjustment in policy rates will be measured and gradually adjusted to achieve positive interest rates. Will
The SBP said the economic recovery since July has strengthened in recent months. Large-scale manufacturing (LSM) grew 7.4 percent year-on-year in October and 14.5 percent in November. Manufacturing recovery is also broad-based, with 12 of the 15 sub-sectors showing positive growth in November and job recovery starting. In the current financial year, LSM has grown by 7.4% as compared to a contraction of 5.3% over the same period last year. The SBP said the trade deficit has widened due to increased imports of machinery and industrial raw materials to boost economic activity, while remittances and exports have continued to rise. The current account remained in surplus during the first half of the current fiscal year, compared to a deficit of over 2 2 billion in the same period last year, driven primarily by workers’ remittances.
The current account deficit is expected to be below 1% of GDP for FY21. The SBP said financial progress has largely been in line with this year’s budget and the government has to stick to its commitment not to take any new loans from the SBP.
The SBP said that in this initial phase of recovery, the financial situation remains reasonably sound, while the policy rate in the slightly negative region is based on the future.
The SBP said, “As demand recovery and inventories have declined in some sectors, working capital loans have also benefited for the first time since the onset of the COVID epidemic, although their levels are lower than last year.” “