Inflation
Pakistan’s inflation rate is expected to remain in the 4-5% range for December, according to the finance ministry’s monthly economic report released on Friday.
This forecast follows a notable slowdown in annual inflation, which fell to 4.9% in November. The decrease was primarily attributed to a high base from the previous year, which made it harder for prices to rise significantly.
Earlier in December, the State Bank of Pakistan (SBP) made a significant move by cutting its key policy rate by 200 basis points, bringing it down to 13%.
This marks the fifth consecutive rate cut by the central bank since June as part of ongoing efforts to revive Pakistan’s sluggish economy.
The central bank has now reduced rates by a total of 900 basis points in 2024, more than the 625 basis points cut during the pandemic in 2020.
This aggressive monetary policy positioning has made Pakistan one of the most proactive emerging markets in easing its monetary stance.
The finance ministry’s report notes that the continued easing of monetary policy is expected to boost economic activity.
Specifically, the rising demand for credit, particularly from the private sector, signals growing confidence in the economy’s recovery.
The government and central bank are hopeful that these measures will provide the necessary stimulus to support economic growth and stabilize inflation.
Looking ahead, the SBP had originally set a target of 5-7% inflation for the medium term. However, with inflation now trending towards the lower end of that range, the central bank’s governor has expressed confidence that the 5% target is within reach in the coming year.
This represents a positive shift in Pakistan’s inflationary outlook as the country grapples with the economic challenges stemming from external pressures and domestic structural issues.
Overall, the latest economic indicators, including the expected inflation rate and monetary policy adjustments, suggest a cautious but steady path toward economic stabilization for Pakistan in the near term.
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