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.