Pakistan holds key rate as inflation seen easing

Bloomberg

Pakistan held its benchmark interest rate steady for the first time in four meetings, opting to watch the effects of previous increases on the Asia’s fastest inflation.
The State Bank of Pakistan (SBP) kept the target rate unchanged at 9.75%, Governor Reza Baqir told reporters in Karachi. Thirty-nine of the 43 economists surveyed by Bloomberg predicted the decision, while the rest forecast a hike in the range of 25 to 50 basis points.
The pause — which comes after the central bank delivered 275 basis points of increases since September — is expected to support a recovery in the economy amid looming risks from the Omicron variant of coronavirus. The decision is in line with the authority’s intent to monitor developments affecting external stability and economic growth, even as it expects previous increases to temper
domestic demand and cool inflation next fiscal year.
While the SBP sees inflation — which came in at 12.3% in December — staying elevated for a bit due to higher energy prices and because of a low base the year ago, it cut the gross domestic product growth forecast to 4.5% for the fiscal year ending June from close to 5% seen previously.
“Several developments suggest that these demand moderating measures are gaining traction and have improved the outlook for inflation,” the central bank said in a statement. It said any changes to monetary policy settings based on future data “would be relatively modest.”
The International Monetary Fund’s board is due to review a $6 billion loan program for Pakistan on January 28.