Monetary policy: SBP hikes interest rate to 16% to curtail inflation

0
909

KARACHI: The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) Friday raised the key policy rate by 100 basis points to 16% — the highest since 1999.

The central bank, in a statement, issued after the meeting said that the decision reflects the MPC’s view that inflationary pressures have proven to be stronger and more persistent than expected.

“This decision is aimed at ensuring that elevated inflation does not become entrenched and that risks to financial stability are contained, thus paving the way for higher growth on a more sustainable basis,” the MPC said.

The SBP noted that amid the ongoing economic slowdown, inflation is increasingly being driven by persistent global and domestic supply shocks that are raising costs.

“In turn, these shocks are spilling over into broader prices and wages, which could de-anchor inflation expectations and undermine medium-term growth,” the statement read, adding that consequently the rise in cost-push inflation cannot be overlooked and necessitates a monetary policy response.

The MPC further noted that the short-term costs of bringing inflation down are lower than the long-term costs of allowing it to become entrenched. Meanwhile, curbing food inflation through administrative measures to resolve supply-chain bottlenecks and any necessary imports remains a high priority.

The central bank increased the rate by a cumulative 900 basis points in 15 months (September 2021 to November 2022) to 16%.

LEAVE A REPLY

Please enter your comment!
Please enter your name here