But with inflation consistently rising to reach a high of 9.4% since the tightening began; it is obvious that there is in fact no strong negative correlation between policy rate and inflation. Should the PM not take to task primarily the Governor of SBP (State Bank of Pakistan) and then the Finance Minister for not highlighting the obvious, and adopting a different policy response to tackling inflation? Is there no accountability for the misery that this policy mindset has brought for the masses in the shape of both high inflation, and lack of investment opportunities in the wake of high policy rate? The economic authorities should understand that inflation in a developing country is both a monetary and fiscal phenomena. Both these policies combined, are expected over time, to improve the strength of Rupee, and in turn reduce the exchange rate inflation pass-through; an important source for rising inflationary pressures.

Source: Pakistan Today April 15, 2019 16:18 UTC