yaseen anwar : main challenges for the state bank of pakistan address by mr yaseen anwar, governor of the state bank of pakistan, on the 65th independence day, karachi, 14 august 2012. * * * dear colleagues, ladies and gentlemen, assalam - o - alakum! i am delighted to be here with you today to celebrate the 65th independence day of our beloved country. today reminds us of our great leaders and forefathers who fought for independence of our nation with a vision to form a country for the welfare of its people. allow me to quote from quaid - e - azam muhammad ali jinnah ’ s famous address at the inauguration of pakistan constituent assembly on 14th august 1947 at karachi ; “ it will be our constant endeavor to work for the welfare and wellbeing of all the communities in pakistan, and i hope that everyone would be inspired by the idea of public service, and they will be imbued with the spirit of co - operation and will excel in their political and civic virtues which go to make a great nation and help to advance its greatness. ” these words reflect the statesmanship, wisdom and vision of our great quaid, under whose inspiring leadership, the first ideological state of the world came into being. the leaders and workers of the pakistan movement also deserve our rich tributes. it is now our duty to transform this country into a truly developed state, as envisioned by our quaid. i am sure that by following the guidance of our founding fathers, we can easily overcome our main challenges. the quaid, while inaugurating state bank of pakistan on 1st july 1948, from this very podium, said in his address that “ state bank of pakistan symbolises the sovereignty of our state in the financial sphere ” and had set some high goals for our institution and i quote ; “ i need hardly dilate on the important role that the state bank will have to play in regulating the economic life of our country. the monetary policy of the bank will have a direct bearing on our trade and commerce, both inside pakistan as well as with the outside world and it is only to be desired that your policy should encourage maximum production and a free flow of trade. ” today, the state bank has been striving to fulfill the twin objectives of monetary policy i. e., maximizing production / employment while ensuring price stability. pakistan has a well developed banking sector and financial infrastructure which helps in meeting the credit demand

told. but there ’ s no doubt it happens. in september 2013, the mpc said that a minimum necessary condition for a rise in interest rates was that unemployment should fall below 7 %. this was not a sufficient condition and the committee was also at pains to emphasise that the actual path of rates would depend on the outlook for the economy at the time. yet quite a few observers viewed the condition as a hard trigger and were confused when rates didn ’ t immediately and automatically rise in response ( memorably, one mp subsequently likened the committee to “ an unreliable boyfriend, blowing hot and cold ” ). similarly, in a speech in july 2015 [ 5 ], the then - governor mark carney said the “ the decision as to when to [ start raising interest rates ] will likely come into sharper relief around the turn of the year ”. this was no more than suggestive and was immediately qualified with a remark about the importance of economic developments in the interim : “ i am conscious of several important considerations which mean the actual path [ of interest rates ] almost certainly will not be mechanical, linear or pre - determined. first and foremost, shocks to the economy could easily adjust the timing and magnitude of interest rate increases …. there is, in fact, a wide distribution of possible outcomes around any expected path for bank rate, reflecting the inevitability that the economy will be buffeted by shocks and that monetary policy will have to adjust accordingly. ” yet when – thanks precisely to such shocks – interest rates did not subsequently rise “ around the turn of the year ”, he was criticised for having misled people. such criticisms, whether justified or not, are par for the course, and may not be that consequential in the grand scheme of things. but there could be a more material cost if, in mistaking conditional for unconditional statements, people come to rely on them at the expense of thinking about the economy, and its implications for interest rates, for themselves. as i said earlier, it ’ s an important part of the transmission of policy, and of the stability of demand more generally, that prices in financial markets respond to economic news as it comes in, without the need for any prompting by the central bank. that is precisely the purpose of the “ delphic ” sort of guidance that, in the main, central banks have employed. but as chart 3 demonstrates, the sensitivity of market interest rates to releases of economic data seems to have declined somewhat