Pakistan’s central bank on Tuesday announced its decision to raise its benchmark interest rate by 100 basis points to 9.75% to combat rising inflation and a large current account deficit.
The bank indicated that it is likely to raise interest rates in the near term, having raised the policy rate to 150 basis points at its last meeting in November.
“Given the rate hike since September and outlook, the MPC (Monetary Policy Committee) feels that the ultimate goal of mild positive real interest rates on a near-future basis has been achieved,” the State Bank said. Pakistan said in a statement. .
“Going forward, monetary policy settings are expected to remain unchanged in the short-term.”
The bank was faced with a falling Pakistani rupee, high inflation and a current account deficit that prompted the bank to start raising interest rates as the country’s government also reached an agreement with the International Monetary Fund to restore its financial plan. $6 billion funding plan stalled.
Rising inflation is hitting the country’s sizable middle class and poor, as prices for staples like food and fuel soar ahead of the frigid winter months.
The bank has revised its inflation forecast for this financial year from 7-9% previously to 9-11%.
The bank noted that the current account deficit had grown “strongly” due to increased imports, in part due to high global commodity prices. The bank forecasts the current account deficit will be 4% of gross domestic product this financial year, up from 2-3% in previous estimates.
https://www.ndtv.com/business/pakistan-central-bank-lifts-rates-by-100-basis-points-to-9-75-to-counter-inflation-report-2651171 Central Bank of Pakistan raises rates by 100 basis points to 9.75% to fight inflation: Report