KARACHI - President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Tanvir Ahmad Sheikh has expressed his serious concern over today's monetary policy statement of the Governor State Bank of Pakistan. He said further tightening of monetary policy by increasing 100 basis points in discount rate will ultimately affect the industry adversely way. Increase in the rate of interest will further increase the cost of production and it will definitely be transferred to consumers which would ultimately add to inflationary pressure. Tanvir Sheikh strongly reacted on the consultations with the stakeholders stated by Governor State Bank of Pakistan in her monetary policy speech. He said that FPCCI was not consulted at all. He mentioned that this is the fourth increase in discount rate since July 31st last year.  The discount rate was 9.5 percent at the end of July 2007 and rate of inflation was 7.8 percent. It was raised by 50 basis points on 31 July 2007 (10 percent), on 1st February, 2008 SBP further raised 50 basis points to 10.5 percent while the inflation had also increased by 1 percent and reached to 8.8 per cent and lastly on 23 May, 2008 SBP raised discount rate by 150 basis points (12 percent) and rate of inflation was 17.2 percent. Now again SBP is trying to repeat its past practice, which is statistically unfavorable for reducing inflation.   It is also notable that SBP has been using tight monetary policy to control inflation since last year but inflation has been rising continuously. It shows that SBP is preparing monetary policy without studying the nature of inflation. In Pakistan, the nature of inflation is not demand pushed inflation, which can be controlled through tight monetary policy. It is supply side phenomena. The major causes of rising inflation in the country are increase in the price of oil, wheat and other food items. All these are inelastic products and monetary policy cannot control their prices. We have to take such measures, which improve the supply side of these goods and have to improve our inventory management. He also pointed out the statement of Governor SBP that Banks balance sheets are under stress. He said banks balance sheets are under stress due to Consumer Financing, where default is high and recovery rate is low. We have been emphasizing that SBP should aim to provide Industrial loans instead of consumer financing. Industrial development can provide more employment. He further said that SBP transferring banks burden to the Industrial sector by increasing rate of interest is a strange logic. He expressed his dissatisfaction on steps taken by SBP to reduce KIBOR. He said that KIBOR depends on the ability of fund lending and liquidity position of banks and determines the inter-bank market by the bank's demand and supply of money. The steps which have been taken by the SBP in the monetary policy will negatively affect the ability of banks lending and will further increase KIBOR. He further said that to reduce KIBOR, policy measures are required instead of steps taken in monetary policy by SBP.  Tanvir also said that in the name of reducing inflation, State Bank policy measures are generating more inflation. As a consequence of these steps inflation in the country will not decrease but it will increase further.