This theory — inflation targeting — holds that if the interest rate is raised, it brings inflation down. Inflation targeting had been first practised by the central bank of New Zealand in 1980. Unfortunately, the government has foolishly agreed to make inflation targeting a legal framework for the State Bank of Pakistan. Any decision to prioritise inflation targeting discourages businesses from making a capital investment. Another flaw of inflation targeting is that it restrains the government from borrowing money from its central bank.

Source: The Express Tribune April 22, 2021 05:35 UTC