One of the reasons for Pakistan’s rising inflation is that the country’s central bank raised interest rates for the second time in more than two months on Monday, the acting governor of the State Bank of Pakistan told CNBC.
Consumer prices have risen in recent months and Pakistan needs to cool its economy, State Bank of Pakistan’s Murtaza Syed told CNBC. He noted that in April, inflation reached a two-year high of 13.4%.
The central bank raised its rate by 150 basis points to 13.75%, saying that “inflation expectations should be kept anchored” and that moderate demand should be further supported at a “sustainable pace”.
“The economy may cool down a bit and yesterday’s decision was a step in that direction,” Syed told CNBC’s “Street Sciences Asia” on Tuesday. “Unlike many other emerging markets, Pakistan has actually had a very shallow recession after Kovid [began]. The economy has shrunk by only 1% – a much better result than what has happened worldwide. And since then, in the last few years, we’ve actually seen very strong growth. “
He said that last year Pakistan’s GDP was 5.6%. According to the International Monetary Fund, Asia’s GDP for 2021 was 6.5%.
The central bank took a similar tack in its monetary policy statement on Monday, saying the economy’s “sustainable and strong return” after the initial Covid shock meant tightening policy to deal with high inflation.
The country’s headline inflation in April was 13.4% which was driven by the rise in fresh food items and core inflation, the central bank said.
Many countries are struggling with high inflation as prices have risen for many years.
In Asia, inflation in developing countries was below the global trend last year, but was expected to rise, according to the Asian Development Bank. Among developing countries in Asia, regional inflation was 2.5% last year, compared to an average of 4.3% in the United States and 9.3% in the emerging economies of Latin America, according to the ADB.
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