KARACHI -UNS-The State Bank of Pakistan announced on Friday that it had increased the interest rate by 100 basis points (bps) to 16 per cent to curb inflation.
The announcement came after a meeting of the bank’s Monetary Policy Committee (MPC).
The central bank said that the decision was 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 SBP identified higher food and core inflation as “key contributors” to elevated inflation.
The bank maintained growth projections for the financial year 2023 and the current account deficit (CAD) the same as the last policy statement at 2pc and 3pc of GDP, respectively.
According to the SBP press release, the decision to raise the policy rate reflected the MPC’s view that “inflationary pressures have proven to be stronger and more persistent than expected”.
The MPC noted that amid the ongoing economic slowdown, inflation was “increasingly being driven” by persistent global and domestic supply shocks that were raising costs.
“In turn, these shocks are spilling over into broader prices and wages, which could de-anchor inflation expectations and undermine medium-term growth. As a result, the rise in cost-push inflation cannot be overlooked and necessitates a monetary policy response.
