KARACHI: The State Bank of Pakistan (SBP) has revised upward interest rate by 150 basic points, inviting huge criticism from experts of monetory market experts.
SBP Governor, Raza Baqir , defended the central bank’s decision of recising interest rate by 1.5 % , taking it to 8 75 % for next two months.
SBP had announced monetory policy here on Friday.
Mufta Ismael of Pakistan Muslim League Nawaz (PMLN) termed the increase in interest rate as disastrous. Arif Habib and AKD both top players called SBP’s decision as a bad decision which in their views will slow down growth rate in coming months.
The central bank’s MPC said that since the last meeting, risks related to inflation and the balance of payments have increased whereas the outlook for growth has continued to improve.
It added that 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.
“At the same time, there are also emerging signs of demand-side pressures on inflation and inflation expectations of businesses have risen on account of further upside risks from domestic administered prices, it added
The SBP said that 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.”
The MPC noted that due to the said 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 normalise monetary policy to counter inflationary pressures and preserve stability with growth,” read the statement, adding that the latest rate hike is a material move in this
