State Bank of Pakistan hikes policy rate by 250bps to 12.25pc

Karachi: The State Bank on Pakistan (SBP) on Thursday benchmark policy rate by 250 basis points to 12.25 per cent.

In a statement, the central bank's Monetary Policy Committee (MPC) said that in its last meeting on March 8, it had noted the "significant uncertainty around the outlook for international commodity prices and global financial conditions" which were further exacerbated by the Russia-Ukraine conflict.

"Since the last MPC meeting, the outlook for inflation has deteriorated and risks to external stability have risen," it noted.

1/3 In an emergency meeting today, MPC decided to raise policy rate by 250bps to 12.25%. This strong and proactive policy response was necessitated by a deterioration in outlook for inflation and increase in risks to external stability since last meeting. https://t.co/VSRwxRQJhY

— SBP (@StateBank_Pak) April 7, 2022

"Externally, futures markets suggest that global commodity prices, including oil, are likely to remain elevated for longer and the Federal Reserve is likely to increase interest rates more quickly than previously anticipated, likely leading to a sharper tightening of global financial conditions," the statement said.

The SBP said in a tweet that "The MPC noted that SBP is also taking further complementary actions to reduce pressures on inflation and the current account, namely an increase in the interest rate on the export refinance scheme (EFS) and widening the set of import items subject to cash margin requirements".

"Looking ahead, the MPC noted that today’s decisive actions, together with a reduction in domestic political uncertainty and prudent fiscal policies, should help ensure that Pakistan’s robust economic recovery from Covid remains sustainable," the tweet concluded.