Pakistan’s central bank startled the market by raising the benchmark interest rate by a huge 1.5 percentage points to an 18-month high of 8.75 percent, considerably ahead of expectations.
According to the State Bank of Pakistan (SBP), the measure is intended at slowing inflation, reducing the expanding current account deficit, and supporting the rupee versus the US dollar.
The central bank raised its inflation and current account deficit forecasts.
Despite the recent policy rate hike, they are projected to remain elevated. For the current fiscal year 2022, they are expected to slightly exceed the upper bounds of the previous anticipated estimates.
“Global commodity prices, as well as potential further upward adjustments in administered energy prices, represent upside risks to the average inflation prediction of 7-9 percent in FY22,” the latest Monetary Policy Statement (SPB) stated.
