State Bank of Pakistan (SBP) Governor Dr Reza Baqir announced that the bank will “pause” its interest rate increases in order to maintain economic recovery after raising policy rates by 275 basis points since September. Dr Baqir discussed monetary policy and the outlook for the economy with Yvonne Man and Rishaad Salamat on ‘Bloomberg Markets: Asia.’ It’s important to us that inflation expectations remain stable, so we’ve raised interest rates by an average of 275 basis points since September. Forward guidance from our Monetary Policy Statement indicates that we are taking a break at this time. First, we’ll assess the impact of the tightening we’ve already implemented, and only then will we consider the appropriate monetary policy settings. It is our belief that a well-coordinated macroeconomic response will be essential in order to maintain the recovery and keep inflation under control. This is the third time in a row that the central bank has raised its key interest rate to 9.75 percent. With inflation at 11.5 percent in November, the rate of increase is timely. Meanwhile, Baqir stated that Pakistan’s economic growth is still “quite brisk.”. “This fiscal year, we expect the economy to grow by 5pc. Baqir said that this is a continuation of the 4pc growth achieved in the previous year. According to Baqir, the economy is “growing quite well” based on an increase in automobile sales, textile exports, and tax collection. Commodity prices have risen sharply around the world, resulting in a rise in Pakistan’s current account deficit and an increase in inflation, according to the head of Pakistan’s central bank. Because of rising global commodity prices, Baqir predicted a 60pc to 70pc increase in the country’s currency. With regard to rupee devaluation, SBP chief said that measures taken will ease pressure on the rupee when demand decreases. “The recent weakening of the rupee, which is about 10pc since this calendar year, overstates the extent of the weakening because we transitioned from a fixed exchange rate to a market-based exchange rate in June of 2019. Year to date on average the rupee is around 162, and this is about the same level as last year from January to December. “Secondly, a market-based exchange rate has served as a good shock absorber and has actually allowed the central bank to build reserves, and that’s what matters when you are looking at the outlook of the currency,” said Baqir, adding that Pakistan’s reserves have increased from $7 billion in June of 2019 to over $19 billion at present. “We expect that as the combined effort of our policies takes effect the pressure on the rupee will abate as domestic demand moderates.” When looking at CYTD and FYTD data, the rupee has lost value against the US dollar by over 11pc and 13pc, respectively.