Pakistan's central bank raises policy rate to record 21%

KARACHI, Pakistan

Pakistan's central bank on Tuesday announced a hike in the policy rate by 100 basis points to 21%, its highest-ever level.

“At its meeting today, the Monetary Policy Committee (MPC) decided to increase the policy rate by 100 basis points to 21%,” said a statement from the State Bank of Pakistan (SBP).

“The MPC noted that inflation in March 2023 rose further to 35.4%, and is expected to remain high in the near term. However, there are early indications of inflation expectations plateauing, albeit at an elevated level,” the statement added.

Viewing the latest increase as an “important" step towards anchoring inflation expectations around the medium-term target, which is critical for achieving the objective of price stability, the committee observed that the country's financial sector “remains broadly resilient, while economic activity continues to moderate.”

The Federation of Pakistan Chambers of Commerce and Industries (FPCCI) has rejected the latest hike in the policy rate.

FPCCI President Irfan Shaikh told reporters that the government has failed to control inflation despite an 11% increase in the policy rate over the past 14 months.

Samiullah Tariq, head of Research and Product Development at Pakistan Kuwait Investment Company, views the SBP decision as an attempt to control the rising inflation.

“This decision has been taken in the context of ever-increasing inflation in the country, and to maintain the real interest rate,” Tariq told Anadolu.