SBP’s continued monetary tightening and government’s supply side interventions to curb shortages of key products has together helped weaken inflationary pressures (built up since late 2004) with headline CPI declining from 9.3% on YOY end June 2005 to 6.9% in March 2006, and core CPI coming down from the range of 7.0-8.0% during Jun FY04-Oct-05 to 6.7% by end March 2006.
Moreover, this was a growth rate that did not appear to cause undue inflationary pressures in the mid to late 2000s. Taking all of this, and noting also the behaviour of inflation more recently, suggests that potential output growth might be somewhere around the current growth rate of GDP of about 8 per cent.