KARACHI: The Monetary Policy Committee of the State Bank of Pakistan has decided to maintain the policy rate at six percent.
This was announced in the monetary policy statement issued by the SPB here on Saturday.
It said that after bottoming out in September 2015 both the Year on Year (YoY) headline CPI and period average inflation are on a rising trend.
The monetary policy statement issued by the SBP further stated that while the YoY inflation rose from 1.3 percent in September 2015 to 3.9 percent in March 2016, the period average inflation increased from 1.7 percent to 2.6 percent during this period.
Similarly, the YoY core inflation measures kept their increasing trends Non-Food-Non Energy increased for the fifth consecutive month and the Trimmed Mean for the third month.
Nevertheless this rise in inflation was anticipated and the benign inflation outlook for the remaining months of FY16 remains largely unchanged.
However, these trends in inflation indicate pickup in aggregate demand amid both improved security situation and real incomes.
This is reflected in rising demand for consumer durables acceleration in construction activities and expansion in services sector.
Continuing increase in fixed investments for the fifth quarter remains noteworthy.
With positive consumer sentiments and incremental lending rates at considerably lower levels the uptake in credit to private sector is expected to end FY16 on a higher level than that of FY15 the SBP, statement added.
At the same time with improved business sentiments lower input prices and better energy availability supply conditions have improved as well.
Largely contributed by automobile cement and fertilizer sectors large scale anufacturing grew by 4.1 percent in Jul Jan FY16 compared to 2.5 percent growth in Jul Jan FY15.
The improving large scale manufacturing and industrial growth trends are expected to continue despite sector specific issues in steel paper and board and sluggish textile sector.
Furthermore excess stock of major food items and the February 2016 pass on of lower oil prices to domestic consumers are expected to keep downward pressure on inflation.
This is also corroborated by a decline in inflation expectations in the latest wave of IBA-SBP consumer confidence survey.
The SBP statement further pointed out that in line with these developments both money and foreign exchange markets exhibited relative tranquility in recent months.
The cushion provided by decline in oil prices, inflow of remittances and calmer international capital markets improved sentiments in the foreign exchange market.
As a result in post January 2016 monetary policy period PKR has remained stable in the interbank market.
Courtesy : TheNews