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*The State Bank of Pakistan (SBP) has set the monetary policy rate at12.25%, a statement from the central bank said Thursday.*
The Monetary Policy Committee (MPC) noted in its statement the significantuncertainty around the outlook for international commodity prices andglobal financial conditions necessitated a strong and proactive policyresponse so it decided at its emergency meeting today, to raise the policyrate by 250 basis points to 12.25 percent.
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This increases forward-looking real interest rates (defined as the policyrate less expectedinflation) to mildly positive territory. The MPC was of the view that thisaction would help to safeguard external and price stability.
The MPC also noted that SBP is in the process of taking further actions toreduce pressures on inflation and the current account, namely an increasein the interest rate on the export refinance scheme (EFS) and widening theset of import items subject to cash margin requirements.
These items are mostly finished goods including luxury items and excluderaw materials. The announcement of these measures is expected soon and willcomplement the action taken by the MPC on interest rates today.
