Karachi-December 14 (Online): The State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC) on Tuesday has raised the policy interest rate by 100 basis points (one percent) to 9.75 percent.
According to the Monetary Policy Committee (MPC), the goal of this decision is to counter inflationary pressures and ensure that growth remains sustainable.
The inflation reading for November soared to 11.5% which was much higher than the central bank’s projection of 7-9% inflation for the year.
Core inflation in urban and rural areas also rose to 7.6% and 8.2% percent, respectively, reflecting domestic demand growth. On the external side, despite record exports, high global commodity prices contributed to a significant increase in the import bill. As a result, the November trade deficit rose to $5 billion based on PBS data.
Following recent rate increase and given the current outlook for the economy, and in particular for inflation and the current account, the Monetary Policy Committee (MPC) felt that the end goal of mildly positive real interest rates on a forward-looking basis was now close to being achieved.
Looking ahead, the MPC expects monetary policy settings to remain broadly unchanged in the near-term.In reaching its decision, the MPC considered key trends and prospects in the real, external and fiscal sectors, and the resulting outlook for monetary conditions and inflation.
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