SBP increases policy rate by 150 basis points to 8.75 percent

ISLAMABAD (92 News) – The State Bank of Pakistan's Monetary Policy Committee increased the policy rate by 150 basis points to 8.75 percent, said a press release issued by SBP on Friday.

The release states that the increase reflected the MPC’s view that  risks related to inflation and the balance of payments have increased while the outlook for growth has continued to improve.

"The heightened risks related to inflation and balance of payments stem from both global and domestic factors. Across the world, price pressures from Covid-induced disruptions to supply chains and higher energy prices are proving to be larger and longer-lasting than previously anticipated. In Pakistan too, high import prices have contributed to higher-than-expected CPI, SPI, and core inflation outturns.

"With respect to the balance of payments, the current account deficits in September and October have been larger than anticipated, reflecting both rising oil and commodity prices and buoyant domestic demand. The burden of adjusting to these external pressures has largely fallen on the rupee.

"As a result of these developments, the balance of risks has shifted away from growth and toward inflation and the current account faster than expected. Accordingly, the MPC was of the view that there is now a need to proceed faster to normalize monetary policy to counter inflationary pressures and preserve stability with growth. Today’s rate increase is a material move in this direction."