SBP Racks Up Interest Rate By 150bps, Rises To 13.75%

Pakistan Foreign Reserves

KARACHI: The State Bank of Pakistan (SBP) on Monday raised the benchmark policy rate by 150 basis points (bps) to 13.75% for the next six weeks to maintain the balance between inflation and economic growth.

The central bank believes that this “effective action” was important to anchor inflation expectations and maintain external stability.

“This action, together with much needed fiscal consolidation, should help moderate demand to a more sustainable pace while keeping inflation expectations anchored and containing risks to external stability,” the central bank said in its monetary policy statement (MPS).

The SBP has cumulatively increased the rate by 675 basis points since September 2021 to control inflation and narrow the current account deficit.

Hinting towards the next Monetary Policy Committee (MPC) meeting scheduled to be held on July 7, the SBP said: “Going forward, to strengthen monetary policy transmission, these rates will be linked to the policy rate and will adjust automatically, while continuing to remain below the policy rate in order to incentivise exports.”