STATE Bank of Pakistan Governor Jameel Ahmed said on Monday that the inflation would stay low for the next three to four months due to some reasons including “end of base effect and some other things in the pipeline”. His statement came after the central bank slashed the key policy rate by 200 basis points (bps) to 13%, marking its fifth consecutive cut as inflation continues to drop. According to him, the next hike in inflation would not be concerning as it would stabilize afterwards.
The statement of the Governor whose institution keeps a close watch on the inflationary situation and the factors contributing to this phenomenon is both satisfying and worrisome for the people. This is because for the short term, he sees continuation of the trend of low inflation rate (for three to four months) but fears a hike afterwards, which means more shocks for the common man. The feared hike might have something to do with the fulfillment of the conditions that the Government agreed with the International Monetary Fund (IMF) in exchange for the ongoing package. Otherwise, the exchange rate is stable, there is no major fluctuation in the price of oil in the international market and the Government is poised to reduce the electricity tariff after conclusion of the ongoing process of negotiations with the IPPs. The reduction of the interest rate from the all-time high of 22% to 13% should also have a salutary effect on the overall pricing situation as it could help pick up economic activities. We hope that the Governor SBP and Finance Ministry will work in unison to address policy flaws that trigger inflation and suppress economic activities.
