The State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC) on Monday raised the policy rate by 100 basis points to 17 per cent, which is highest since October 1997.
The MPC of the State Bank convened today with Governor SBP Jameel Ahmad in the chair to announce the first scheduled monetary policy for the calendar year 2023.
The SBP governor said that the MPC also performed a detailed analysis of the country’s inflation. “The committee believed that a 1 per cent hike [in the interest rate] to anchor inflation was necessary.”
In November 2022, the MPC raised the policy rate by 100 basis points to a two-decade high of 16 per cent.
The committee, in its meeting, noted that inflationary pressure was persistent. “It noted that price stability was required to control inflation and maintain the growth rate,” Ahmad said.
“Our short-term challenges, including current account deficit, remain. There is some delay in the inflows we were expecting due to which our reserves are under pressure.”
Thirdly, the committee noted the global economic situation, including the International Monetary Fund and the World Bank’s downgrading of the global economic growth rate and the prevailing uncertainty. “It affects our market directly or indirectly. For example, our exports and remittances are impacted.”
The Monetary Policy Committee took the decision to raise the policy rate after a detailed analysis of the country’s external and fiscal position, the SBP governor said.
