My last topic is the requirements for fiscal policy and other economic policies under a fixed exchange-rate regime vis-a-vis the euro. A fixed-exchange-rate policy implies that the stance of monetary policy is from time to time out of line with domestic short-term cyclical needs.
And that the dividends of interest rate adjustments are visible since inflationary trends have shown a persistent downtrend since the beginning of January 2006. Most encouraging is the fact that interest rate adjustment and its transmission mechanism has started to work. SBP has increased its interventions to ensure that the short term inter-bank market rates remain close to the discount rate.