KARACHI: The State Bank of Pakistan’s (SBP) Monetary Policy Committee on Tuesday increased interest rate by 100 basis points to 9.75 percent to counter inflationary pressures and ensure that growth remains sustainable.
This is the third successive interest-rate increase since September 2021 by MPC.
“The MPC decided to raise the policy rate by 100 basis points to 9.75%, to counter inflationary pressures, address the current account deficit, and ensure that growth remains sustainable,” read the statement.
1/2 The MPC decided to raise the policy rate by 100 basis points to 9.75%, to counter inflationary pressures, address the current account deficit, and ensure that growth remains sustainable. https://t.co/hiSvVsk9w4
— SBP (@StateBank_Pak) December 14, 2021
“Given rate increases since Sept and outlook, the MPC felt that the end goal of mildly positive real interest rates on a forward-looking basis was now close to being achieved. Looking ahead, monetary policy settings are expected to remain broadly unchanged in the near-term,” it further said.
The MPC further noted that the current account deficit is expected to be fully financed from external inflows.
“As a result, foreign exchange reserves should remain at adequate levels through the rest of the fiscal year and resume their growth trajectory as global commodity prices ease and import demand moderates,” it added.
The MPC noted that inflation is likely to remain within the revised forecast range for the remainder of the fiscal year.
“Subsequently, as global commodity prices retrench, administered price increases dissipate, and the impact of demand-moderating policies materializes, inflation is expected to decline toward the medium-term target range of 5-7 percent during FY23,” it added.
In the previous monetary policy meeting held on November 19, 2021, the SBP decided to increase the number of MPC meetings from six to eight times a year in line with international best practices.
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