KARACHI : State Bank of Pakistan (SBP) has decided to raise policy rate by 25 basis points to 7.25 percent. The decision was taken by the Monetary Policy Committee (MPC) at its meeting on Monday. The meeting noted that the pace of the economic recovery has exceeded expectations. This robust recovery in domestic demand, coupled with higher international commodity prices, is leading to a strong pick-up in imports and a rise in the current account deficit. While year-on-year inflation has declined since June, rising demand pressures together with higher imported inflation could begin to manifest in inflation readings later in the fiscal year. “The MPC was of the view that the priority of monetary policy also needed to gradually pivot from catalyzing the recovery after the Covid shock toward sustaining it,” the statement said. This rebalancing would be best achieved by gradually tapering the significant monetary stimulus provided over the last 18 months, the MPC noted. The MPC noted that the stance of monetary policy is still appropriately supportive of growth, with real interest rates remaining negative on a forward-looking basis. Looking ahead, in the absence of unforeseen circumstances., with month-on-month increases of 1.3 percent in July and 0.6 percent in August.
