Pakistan’s Inflation Slows After Four Rate Increases: Bloomberg

By Khalid Qayum

Jan. 12 (Bloomberg) -- Pakistan’s inflation eased from near a three-decade high in December after the central bank raised its benchmark interest rate four times in 2008.
Consumer prices in South Asia’s second-largest economy increased 23.34 percent from a year earlier after gaining 24.68 percent in November, the Federal Bureau of Statistics said in Islamabad today. Analysts were expecting a 22.6 percent increase.

Slower inflation may allow the State Bank of Pakistan to refrain from another rate increase in its next policy statement later this month, economists said. The central bank promised the International Monetary Fund as part of a $7.6 billion bailout to raise borrowing costs if foreign reserves drop too low.

“Given our declining inflationary numbers and stable exchange rate outlook, we expect interest rates to decline in coming months,” said Muhammad Imran Khan, an analyst at First Capital Securities Ltd. in Karachi. “An interim cut in the key policy rate between January and July cannot be ruled out.”

Former Governor Shamshad Akhtar on Nov. 12 raised the central bank’s key rate by 2 percentage points to 15 percent, describing the move as “the toughest decision of my life.” The bank pledged to the IMF to increase the rate again if foreign reserves fell below $1.165 billion at the end of December.

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