Pakistan’s central bank will pause interest-rate increases to preserve economic recovery after delivering Asia’s boldest hikes since September, Governor Reza Baqir said.
“We are going to take a pause to first look at the effects of the tightening we have already done,” Baqir
told Bloomberg Television’s Rishaad Salamat and Yvonne Man. “Fiscal policy has been very complementary and is also withdrawing stimulus so a coordinated macroeconomic response, we think, will be number one to sustain recovery and keep inflation broadly in check.”
A wider current-account deficit, faster inflation and stronger economic growth are factors that could get the State Bank of Pakistan (SBP) to resume its rate hike journey, he said. Despite the rate increases, Baqir expects the economy to grow 5% in fiscal year ending June, after
expanding 4% a year ago.
The SBP raised rates by a cumulative 275 basis points in three moves since September to tame region’s fastest inflation and check a larger-than-anticipated gap of $5 billion
in November print of current account.
That’s taken a toll on the rupee, which has been the worst performer for the past six months among 13 Asian currencies tracked by Bloomberg.
The pressure on the rupee is going to dwindle once demand drops, Baqir said.