During an emergency meeting convened on Monday, the State Bank of Pakistan (SBP) made the decision to raise the policy rate by 100 basis points (bps), resulting in a new rate of 22 per cent.

The announcement was made subsequent to a gathering of the bank’s Monetary Policy Committee (MPC).

The SBP clarified that the MPC acknowledged a heightened potential for upward risks to the inflation outlook compared to its previous meeting held on June 12.

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The committee highlighted that these risks primarily stem from the implementation of new measures in the fiscal and external sectors, which hold significant importance in the context of concluding the ongoing programme with the International Monetary Fund (IMF).

“MPC noted that today’s action is necessary to keep the real interest rate firmly in positive territory on a forward-looking basis that would help in bringing down inflation towards the medium-term target of five to seven per cent by the end of fiscal year 25,” the SBP said.