KARACHI – The State Bank of Pakistan (SBP) Tuesday increased the policyrate by 100 basis points to 9.75 percent to counter inflationary pressuresand ensure that growth remains sustainable.
“Since the last meeting on 19thNovember 2021, indicators of activity haveremained robust while inflation and the trade deficit have risen furtherdue to both high global prices and domestic economic growth. In November,headline inflation increased to 11.5 percent (y/y),” the central bank saidin a statement.
Core inflation in urban and rural areas also rose to 7.6and 8.2 percent,respectively, reflecting domestic demand growth. On the external side,despite record exports, high global commodity prices contributed to asignificant increase in the import bill.
As a result, the November trade deficit rose to $5 billion based on PBSdata. The MPC noted that recent data releases confirm that the emphasis ofmonetary policy on moderating inflation and the current account deficitremains appropriate.
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Following today’s rate increase and given the current outlook for theeconomy, and in particular for inflation and the current account, the MPCfelt that the end goal of mildly positive real interest rates on aforward-looking basis was now close to being achieved.
Looking ahead, the MPC expects monetary policy settings to remain broadlyunchanged in the near-term.4.In reaching its decision, the MPC consideredkey trends and prospects in the real, external and fiscal sectors, and theresulting outlook for monetary conditions and inflation.
