Sat. Jan 11th, 2025

SBP hikes policy rate by 100bps to 16pc

KARACHI (MNP) – The State Bank of Pakistan (SBP) on Friday raised the interest rate by 100 basis points (bps) to 16 per cent.

According to the statement issued by the SBP, this decision reflects the MPC’s view that inflationary pressures have proven to be stronger and more persistent than expected.

The MPC further said that “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.”

In an issued press release, the central bank stated that in today’s meeting the Monetary Policy Committee (MPC) decided to raise the policy rate by 100 basis points to 16 percent. This decision reflects the MPC’s view that inflationary pressures have proven to be stronger and more persistent than expected. It 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.

Amid the on-going 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. As a result, the rise in cost-push inflation cannot be overlooked and necessitates a monetary policy response.

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