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KARACHI: The State Bank of Pakistan (SBP) on Thursday raised the monetary policy rate by 125 basis points to 15%, the highest since November 2008, for the next six weeks to maintain the balance between inflation and economic growth.
Acting State Bank of Pakistan (SBP) governor Murtaza Syed made the announcement after monetary policy committee meeting.
1/4 At today’s meeting, the Monetary Policy Committee decided to raise the policy rate by 125 basis points to 15 percent. https://t.co/Dy56T1HGz7
— SBP (@StateBank_Pak) July 7, 2022
4/4 Against this challenging backdrop, the MPC noted the importance of strong, timely and credible policy actions to moderate domestic demand, prevent a compounding of inflationary pressures and reduce risks to external stability.
— SBP (@StateBank_Pak) July 7, 2022
The rate hike came as the coalition government is trying hard to revive the much-awaited International Monetary Fund (IMF) for the resumption of a $6-billion loan program that had been stalled since early April.
The central bank has cumulatively increased the rate by 800 basis points since September 2021 to control inflation and narrow the current account deficit.
Murtaza Syed said inflation is increasing across the world and the recent wave is being witnessed for the first time in 50 years. Defending the increase in interest rate, the SBP governor said the situation could have turned worse if the interest rate was not jacked up.
He hoped that the rate of inflation will remain between 18 to 20pc in the current fiscal year of 2022-23.
In the previous monetary policy meeting held on May 23, the SBP raised the monetary policy rate by 150 basis points to 13.75% for the next six weeks to maintain the balance between inflation and economic growth.
“The MPC decided to raise policy rate by 150bps to 13.75%. This action, together with much needed fiscal consolidation, should help moderate demand to more sustainable pace while keeping inflation expectations anchored & containing risks to external stability,” the central bank had said in a statement.
According to a statement issued by the central bank, this combined action continues the monetary tightening underway since last September, “which is aimed at ensuring a soft landing of the economy amid an exceptionally challenging and uncertain global environment.”
