Policy Reversal: SBP unexpectedly hikes
rates by 100 basis points
Pakistan's central bank conducted an emergency meeting on Monday and decided to raise its key rate by 100 basis points to 22%, as stated in an official statement.
This meeting was held a day after the
approval of a revised annual budget, with the aim of securing a last-minute
bailout from the International Monetary Fund before the expiration of the
program on June 30.
The central bank's monetary policy committee
acknowledged two significant domestic developments since the last meeting,
which have slightly worsened the inflation outlook and could potentially add
pressure to the already strained external account. These developments include
upward revisions in taxes, duties, and the petroleum levy rate in the recently
approved FY24 budget, along with the central bank's withdrawal on June 23 of
its general guidance for commercial banks regarding import prioritization.
Earlier this month, the central bank had
maintained its key interest rate unchanged, aligning with market expectations
and suggesting a pause in its tightening cycle, as it believed that the
record-high inflation might have reached its peak.
Source: Arab News