IMF warns against premature rate cut

April 18, 2024 (MLN): The key for most countries is to ensure that they are durably back to their inflation targets and not to ‘cut prematurely’, said Jason Wu, Assistant Director, Monetary and Capital Markets Department, of International Monetary Fund (IMF) while addressing a press briefing.

He said that the monetary policy has been tightening over the past two or three years in Pakistan to control inflation, which is projected to come down but more work needs to be done on demand and supply side.

Wu further added that both the supply and demand side contribute to inflation. So in that sense, policy is needed on both sides.

On the demand side, fiscal consolidation needs to be continued, while reforms of the energy sector, and state-owned enterprises (SOEs) are required.

Many economies in the frontier space face similar challenges as well and the Fund staff continues to engage with Pakistan on this issue, Wu added.

The Assistant Director IMF said that Pakistan is in a program, and faces macro challenges, which include the financial sector and central bank policies, as well as broader macro and fiscal issues.

Additionally, the adjustments often require some time to take hold.

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