SBP increases interest rate to 6pc for next two months
The decision would balance growth and stability in medium to long term, the SBP's monetary policy committee observes
January 26, 2018
KARACHI: The State Bank of Pakistan (SBP) on Friday announced its monetary policy for the next two months, raising its main policy interest rate by 25 basis points to 6 percent after the recent depreciation of the rupee.
The central bank, in a press statement, said four key factors of Pakistan’s economy have witnessed important changes since November 2017 impinging upon the policy rate decision.
Firstly, the Pakistani rupee has depreciated by around 5 percent. Secondly, oil prices are hovering near $70 per barrel, the statement said.
A number of central banks have started to adjust their policy rates upwards, adversely affecting rupee interest-rate differentials vis-à-vis their currencies.
Fourthly, it said, multiple indicators show that the output gap has significantly narrowed indicating a buildup of demand pressures.
Based on these developments, the SBP's monetary policy committee observed that this was the right time to make a policy decision in order to preempt overheating of the economy and inflation breaching its target rate.
It said the decision would balance growth and stability in the medium to long-term.
