Pakistan News / Pakistan is now following the footsteps of Canada-Europe, has taken this big step

Vikrant Shekhawat : Jun 11, 2024, 08:16 AM
Pakistan News: Neighboring country Pakistan has followed the footsteps of Canada and Europe. Despite having an inflation rate of more than 17 percent, the Central Bank of Pakistan has taken a step which even the US Fed Reserve and India's RBI do not have the courage to take. Yes, Pakistan has cut its interest rates by one and a half percent. This decision has come at a time when a few days ago the Central Bank of India did not change the repo rate citing the need to fight inflation for a few more days. On the other hand, the meeting of the Fed Reserve is also going to be held in a few days. It is expected that the Fed is also in the mood not to make any change in its interest rates. The special thing is that recently Europe and Canada had cut the policy rate. After which it was being speculated that the rest of the countries of the world would also cut interest rates.

Pakistan took a big step

Amid improvement in inflation, the Central Bank of Pakistan on Monday cut the policy interest rate by 1.5 percent to 20.5 percent. The State Bank of Pakistan (SBP) said in a statement that the current economic growth was reviewed in its Monetary Policy Committee (MPC) meeting. During this, it emerged that inflation has declined more than expected in May. The MPC also took cognizance of some risks to the near-term inflation outlook related to uncertainty regarding upcoming budgetary measures and future energy price adjustments. According to the statement, despite these risks and the decision to cut rates, the steps taken earlier are expected to curb inflationary pressure.

How much has inflation reduced

According to Pakistani media reports, Pakistan's inflation rate has come down to 17.3 percent. Which is less than half as compared to the same period last year. In May 2023, Pakistan's inflation rate was at its peak with 38 percent. Whereas in May 2022, Pakistan's inflation rate was more than 20 percent. This means that the inflation rate in Pakistan has come down to a two-year low. In such a situation, Pakistan's inflation rate coming around 17 percent in the month of May this year is nothing less than a miracle. According to media reports, Pakistan's inflation rate has fallen by 0.4 percent month-on-month. This means that for the first time since June 2023, Pakistan's inflation rate has been seen in negative territory. In its monthly economic report, Pakistan's Finance Ministry said that it expects inflation to be between 18.5 percent and 19.5 percent in April and will come down to 17.5 percent-18.5 percent in May.

India did not change

On the other hand, India's interest rates were announced on Friday. The RBI Governor has not made any change in the country's interest rates for the 8th consecutive time in the repo rate. Currently the policy rate remains at 6.5 percent. The last time the RBI changed the repo rate was in February 2023. Then the MPC had increased the interest rates by 0.25 percent. From May 2022 to February 2023, RBI had increased the policy rate by 2.50 percent. RBI estimates that India's inflation rate may remain at 4.5 percent in the current year. While the growth rate can be 7.2 percent. By the way, in the month of April, India's inflation rate remained below 5 percent for the second consecutive month. SBI estimates that India's inflation may come down to 5 percent in the month of May.

What is India's stance?

Announcing the interest rates, the RBI Governor had said that it is understood that India follows the US Central Bank. But it is not so. India has its own inflation and growth rate outlook. India will move forward accordingly. Till the inflation rate in India does not come to the target level, no such decision will be taken which is not in the interest of the country and the common people. By the way, RBI's MPC has indicated that interest rates will remain liberal in the coming months. Due to which it is being speculated that interest rates can be cut in the meeting to be held in October or December. However, many experts also estimate that there is no possibility of any reduction in inflation rate by the Central Bank of India in the current financial year.

Canada and European Bank cut rates

Last week, two central banks of the world announced a cut in their interest rates. Let's first talk about Canada. The Canadian Central Bank was the first in the world to announce a cut in interest rates. Canada has reduced its policy rate from 5 percent to 4.75 percent. On the other hand, last week on Thursday, the European Central Bank also announced a cut in interest rates after about 5 years. The bank has cut its interest rates by 0.25 percent. According to experts, in the coming months, other countries of the world like America can also announce a cut in their interest rates. It is reported that in the second half, the US Fed can cut interest rates twice. Which can be 0.25-0.25 percent. This means that interest rates can be cut by a total of 0.50 percent.