The MPC stressed adopting a cautious approach noting that
core inflation remains elevated, with high frequency indicators showing gradual
improvement. The impact of 1,000bps reduction in the policy rate since June 2024
will continue to unfold, driving growth.
The committee also added that 1QFY25 GDP growth remained
below expectations.
Tax
collection during 1HFY25
also remained below the target.
Global oil prices remained volatile and that the global
economic policy environment has become more uncertain.
Going forward, economic activity is expected to gain more
traction with GDP growth for FY25 in the range of 2.5 to 3.5%.
Headline inflation for FY25 is now expected to average
between 5.5 to 7.5%, subject to risks from volatile commodity prices,
adjustment to energy prices, volatile food prices and impact of revenue
measures.
On the fiscal front achieving the target for primary surplus
would be challenging, while overall deficit is likely to come close to the target.
Outlook for the current account has improved considerably
due to robust remittances. The current account balance for FY25 is anticipated
to swing between a surplus and a deficit of 0.5% of GDP.
