Islamabad: Pakistan‘s inflation annual rate has significantly decreased to a 44-month low of 6.9%, primarily due to favorable base effects and a decline in non-perishable food prices. This positive development offers the central bank a significant opportunity to implement multiple interest rate cuts to stimulate the economy.
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A notable achievement is the decline of all three benchmark indicators—annual, core, and average inflation rates—to single digits. This indicates a substantial reduction in underlying inflationary pressures. The Pakistan’s inflation rate witnessed a remarkable drop from 9.6% in August to 6.9% in September.
This favorable inflationary environment empowers policymakers to adopt more accommodative monetary policies to revitalize the economy, which has been grappling with high poverty and unemployment. Prime Minister Shehbaz Sharif praised his economic team for achieving the reduction in Pakistan’s inflation rate, emphasizing the relief it would bring to the common people.
The reduction in interest rates is expected to stimulate business activities across Pakistan. The government’s successful management of inflation has also dispelled concerns about the country’s default.
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However, questions have been raised about the methodology used to monitor electricity prices, as it only captures the consumption of a small portion of residential consumers. This has led to concerns about the accuracy of the reported inflation rate. Despite some challenges, the overall decline in inflation is a positive sign for Pakistan’s economy. It opens the door for interest rate cuts and provides much-needed relief to the population.
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