The SBP kept its benchmark interest rate, the discount rate, on hold in March, owing to a diminution in "immediate risks to macroeconomic stability". But the rate of year-on-year consumer price inflation has been in double digits in every month bar one since January 2008, and Pakistan will continue to rely on monetary policy to tackle high inflation, despite evidence that supply-side problems (such as hoarding of foodstuffs, and destruction of crop land and grain-storage facilities in the floods), as well as the government's reliance on the SBP for deficit financing, are playing a more important part than strong domestic demand in pushing up prices. The central bank noted explicitly that it expected risks to macroeconomic stability to increase again in 2011/12, and we therefore expect monetary policy to be tightened in the second half of 2011. Assuming that inflation moderates in the second half of 2011 and remains subdued in 2012-15, we believe that the SBP will then be keen to lower interest rates to spur economic growth.