Governor State Bank of Pakistan, Reza Baqir, has said that the inflation rate will start slowing down in the second half of the current fiscal year (first 6 months of 2020). It will decrease even further in the next financial year 2020-21.
He said this while announcing the monetary policy for the next two months. The central bank has increased the policy rate by 100 basis points, making it 13.25 percent from 12.25 percent.
The governor said that the new interest rate has been adjusted due to an increase in the inflation rate over the next two to three months. The central bank has revised its inflation forecast for the year ending June 30, 2020. It expects the inflation rate to remain between 11 percent and 12 percent.
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The State Bank had increased its policy rate back in September 2018 to contain inflation. The policy rate is at its highest level in the last seven years, reaching 13.25 percent from 5.75 percent. The inflation rate rose from 5.1 percent in September 2018, to 9.4 percent in March 2019. It fell back to 8.9 percent in June.
“We expect a significant reduction in the inflation rate in the first half [July 2020-June 2021] of the next fiscal year as the one-off effect of some of the causes of the recent rise in inflation diminishes,” said the State Bank governor.
