Islamabad January 23 2023: The State Bank of Pakistan will likely keep its policy rate at 16.0% in January, refraining from further tightening to support growth.
The central bank, in Bloomberg Economics view, will avoid further hikes that could cause the economy to contract. Growth has been hit by widespread floods, higher borrowing costs and dollar shortages that have led to import restrictions.
A sharp narrowing of the current account deficit to
sustainable levels in recent months also lessens the need for hikes now.
Inflation will likely stay far above the SBP’s 5%-7% target
range in the near term, but raising rates won’t help to lower it. Demand is not driving the price gains. They are the result of flood-caused supply disruptions, a dollar shortage that has squeezed imports, and tax hikes demanded by the International Monetary Fund — all factors the central bank has little power to influence.
The decision is due later Monday (today).
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