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