ISLAMABAD - The sharp decline in inflation rate might help the State Bank of Pakistan to reduce interest rate to single digit from existing 10.5 per cent in the monetary policy to be announced in the ongoing month of December.

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The inflation - measured by the Consumer Price Index (CPI) - clocked in at 6.9 per cent in November 2012 thus paving way for central bank to bring interest rate in the single digit figures from existing 10.5 per cent. The State Bank of Pakistan (SBP) would announce the monetary policy during the ongoing month of December. However, date for announcing the policy is not decided yet, said Syed Wasim-ud-din official spokesperson of the State Bank of Pakistan while talking to The Nation. He said that board of central bank would decide to retain or change the interest rate in the upcoming monetary policy. Earlier, the State Bank of Pakistan (SBP) has reduced its policy rate by 150 basis points to 10.5 percent effective in August 2012.

Meanwhile, the average inflation during first five months (July-November) of the ongoing financial year 2012-13 remained at 8.4 per cent, which is far below the government’s target rate of 9.5 per cent for the current fiscal year. Therefore, the independent economists believed that State Bank of Pakistan could reduce the interest rate to single digit after sharp decline in inflation rate. The economists said that SBP could reduce the interest rate in the upcoming monetary policy. “The government is manipulating the inflation rate to force the central bank to reduce the interest rate in single digit in order to happy the brokers of the stock exchange”, said eminent economist Dr Ashfaq Hussan Khan while talking to The Nation.

He further said that inflation calculated on the basis of illusionary reduction of gas prices is a meaningless number and if not corrected by the PBS, inflation in Pakistan could come down to 2.5 to 3 percent by June 2013.