Pakistan’s central bank is in “wait-and-see” mode to give businesses the confidence they need to start investing again and keep people employed, Governor Reza Baqir said on Wednesday.
After reducing by 625 basis points since March, the State Bank of Pakistan this week kept its policy rate unchanged at 7 per cent. In its policy statement, the central bank said that business confidence and the growth outlook have improved as lockdowns eased due to a decline in the number of Covid cases in Pakistan.
“Our policy stance right now, to catch an idiom, is ‘steady as she goes.’ We want to give industry and investors the confidence that with aggregate demand very tepid, a yawning output gap because of the sharp fall in external and domestic demand from Covid, we don’t see any demand-driven pressures on inflation in the near horizon,” Baqir told CNBC.
With real interest rates slightly negative at the moment, he said it was “appropriate to give (businesses) the confidence to get back to the business of thinking about investment and to continue mending jobs. That’s a key priority right now, given the fact that we don’t see inflationary risks from demand on the horizon.”
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