SBP increases interest rate to 6pc for next two months

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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.

Categories: Business

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