SBP hikes interest rate to 16%

The State Bank of Pakistan (SBP) has announced the monetary policy and hicked the policy rate by 100 basis points to 16% to manage inflation.

“At today’s meeting, the Monetary Policy Committee (MPC) decided to raise the policy rate by 100 basis points to 16 percent. This decision reflects the MPC’s view that inflationary pressures have proven to be stronger and more persistent than expected. It is aimed at ensuring that elevated inflation does not become entrenched and that risks to financial stability are contained, thus paving the way for higher growth on a more sustainable basis.” The statement reads

Following the meeting, the SBP informed that the decision reflects the MPC’s view that inflationary pressures have proven to be stronger and more persistent than expected.

“This decision is aimed at ensuring that elevated inflation does not become entrenched and that risks to financial stability are contained, thus paving the way for higher growth on a more sustainable basis,” the MPC said.

In the last meeting, the MPC observed three significant domestic developments, including:

1. In October, headline inflation spiked, food prices also advanced dramatically, and core inflation rose even further. In addition, September and October saw a large reduction in the current account deficit due to a steep fall in imports.
2. Incorporating the Post-Disaster Needs Assessment for flooding, the growth expectations for FY23 are reaffirmed at around 2% and the current account deficit at roughly 3% of GDP.
3. However, the committee noted that rising food prices and core inflation are anticipated to increase average inflation for FY23 to between 21 and 23 percent.