In a surprise move, the State Bank of Pakistan (SBP) on Thursday raised its benchmark interest rate by 250 basis points to 12.25%, Bloomberg has reported.
The recent hike comes after the Pakistani rupee plunged to an all-time low of Rs 188.18 against the US dollar in the inter-bank market.
At its last meeting on March 8, the Monetary Policy Committee (MPC) had noted that it “was prepared to meet earlier than the next scheduled MPC meeting on April 19, if necessary, to make any needed timely and calibrated action to safeguard external and price stability.”
The MPC was scheduled to meet on April 19, 2022 to decide the interest rate.
According to a statement issued by the central bank; the inflation out-turn in March surprised on the upside, with core inflation in both urban and rural areas also rising significantly.
The MPC further noted that in addition, there has been a decline in the SBP’s foreign exchange reserves “largely due to debt repayments and government payments about the settlement of an arbitration award related to a mining project.”
The MPC noted that the above developments necessitated a “strong and proactive policy response.”