Comparison and highlights of the main features of Monetary Policy of Sept 2014 and Nov 2014
The main features and comparison of Monetary Policy of September 2014 and November 2014 are given and described as under:
Inflation: Inflationary pressures stabilized over the fourth quarter with inflation falling to 5.8 % in November 2014 from 7.8 % in September 2014. The decline in inflation was due to:
- Smooth food supplies
- Price of perishable items
- Falling administered prices
- Fall in international commodity prices
- Low inflation expectations
Interest Rate: Interest rate declined slightly and it is 9.5 % in November 2014 as compared to 10 % in September 2014.
Global Economic Developments: Commodity prices fell over the September 2014 and the same trend has been maintained in November 2014.Oil prices declined in September 2014.
In November 2014 it declined further.
Domestic Money Market and Government Securities: In the government securities market, there was a significant improvement in demand for Treasury-bills during the third quarter and the interbank rate fell down in September 2014.
It remained same in November 2014.
Foreign Exchange Inflow: In September 2014, there was a declining trend in foreign direct investment (FDI) and private capital inflow.
In November 2014, foreign exchange inflow increased due to which there was less borrowings from banking sector.
Agriculture Sector: In both September and November 2014, there was damage in crops specially kharif crops due to floods but agriculture output is expected to grow and perform better than the previous year’s especially now when Rabbi season crops has announced such as: the recent increase of PRs. 100 in wheat support price.
Imports and Exports: In September 2014, exports and imports, oil payments and trade deficit was going to dominate the composition of external current account deficit even with healthy growth in worker’s remittances.
In November 2014, low oil price along with falling inflation can improve competitiveness of Pakistani exports. Imports, on the other hand, might take advantage of low global commodity prices. This gave the significant imports intensity for exports sector in Pakistan. Current slowdown in exports is further challenged by falling international cotton prices.
Large Scale Manufacturing: In September 2014, Large Scale Manufacturing growth remain constrained due to continued energy shortages, reduced production capacity of independent power plants, low supply of gas to fertilizer plants, lower domestic and international prices in the sugar sector.
In November 2014, growth in Large-scale manufacturing would remain constrained due to energy bottlenecks. There was limited investment in Large Scale Manufacturing.
The writer is a Business Administration Student (Finance) in University of Agriculture, Faisalabad, Pakistan.