Karachi: The State Bank of Pakistan (SBP) on Thursday (April 07) has increased the interest rate by 250 base points, setting it to 12.25%, news sources reported. The SBP Chairman, Dr Raza Baqir, termed the decision a proactive and robust policy response to the international commodity prices.
Reportedly, in its latest Monetary Policy Committee (MPC) meeting, the members took into consideration the significant uncertainty around the outlook for international commodity prices and global financial conditions, which were further exacerbated by the Russia-Ukraine conflict. In a statement released by the SBP handle, it was said that since the MPC’s last meeting on March 8, the rising fuel prices in international markets and the resultant inflation have pressured the SBP to take protective measures to stabilize the economy. He said that due to the high import of crude oil, theCurrent Account Deficit (CAD) is 4% of the Gross Domestic Product (GDP) which is feeding inflation.
1/3 In an emergency meeting today, MPC decided to raise policy rate by 250bps to 12.25%. This strong and proactive policy response was necessitated by a deterioration in outlook for inflation and increase in risks to external stability since last meeting. https://t.co/VSRwxRQJhY
Similarly, the high CAD has also resulted in a 5% depreciation of the rupee against the dollar. This has also resulted in a higher inflation rate of 11% in the current Fiscal year of 2022. Moreover, the statement also mentioned more decisions to stabilise the economy and reduce inflation. These decisions will be announced soon following the policy rate hike.
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