SBP jacks up key policy rate by 125 basis points to 15 pc to cut inflation

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state bank of pakistan

Monitoring Desk

KARACHI: Pakistan’s central bank increased its key policy rate by 125 basis points to 15% on Thursday to control high inflation and narrow down the current account deficit.
Inflation is anticipated to continue surging over the next three to four months. It recorded a 13-year high of 21.3% in June 2022.
Inflation is estimated to peak at around 23% in a few months and comes in the wake of an increase in petroleum products and power prices under IMF conditions.
Similarly, the current account deficit (CAD) is estimated to spike to $16-17 billion for the full previous fiscal year which ended June 30, 2022, compared to $1.85 billion in the prior fiscal year of 2020-21.
The significant surge in global commodity prices caused the domestic economy to see imported inflation.
Similarly, the significant price hike in global commodities elevated the country’s import bill and stretched its current account deficit.
Earlier, the central bank had cumulatively revised the key policy rate by 675 basis points from September 2021 to May 2022 to an 11-year high of 13.75%.