KEY POINTS FROM MPC ANNOUNCMENT
Economic growth in FY22 is now expected toward the upper end of 4-5% CAD rose to $0.8 billion in July and $1.5 billion in August, reflecting both vigorous domestic demand and high global commodity prices
Remittances remained strong, growing by 10.4% during July-August
Exports also performed reasonably well (averaging $2.3 billion per month
Rupee depreciated by 4.1% since July
Many other currencies depreciated recently
In FY21 primary deficit declining by around ½ percentage points to 1.4% of GDP
Improvement largely stemmed from strong growth in tax and petroleum development levy
Deficit contained owing to significant deceleration in non-interest expenditures
In the first two months of FY22, FBR revenue grew by over 40 percent (y/y)
Federal PSDP releases rose to an all-time high for this period, equivalent to nearly 44% of their budgeted amount for the full year.
Any unforeseen slippages in the fiscal stance would further bolster domestic demand, imports and inflation.
Historic cuts in policy rate and introduction of SBP Covid-related support packages help private sector
Private sector credit grew by more than 11% during FY21
Consumer loans (mainly auto finance and personal loans) followed by working capital loans
Inflation fell from 9.7 percent (y/y) in June to 8.4 percent in both July and August
Core inflation also fell in both urban and rural areas in August.
Nevertheless, prices remains relatively elevated, with month-on-month increases of 1.3% in July and 0.6% in August.
Inflation expectations of both households and businesses have drifted up and wage growth has picked up Inflation outlook largely depends on the path of domestic demand, notably fuel and electricity, as well as global commodity prices.
MPC will continue to carefully monitor developments affecting medium-term prospects for inflation, financial stability and growth and stands ready to respond appropriately.
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