Pull over, the economy’s check engine lights are on

What does the hiking of the interest rate mean in the larger scheme of things?

There are two kinds of people. The first are the stable ones. As soon as they see the ‘check engine’ light on their cars turn on, they pull over and call a mechanic. At most, they will take the risk of taking their car to the mechanic themselves. The other kind of people are the chaotic ones. These are the ones that not only ignore their check engine light as if it means nothing, but when the car engine starts rumbling and making scary noises they turn up their stereo to drown out the noise and ignore the problem. Of course, eventually the car will break down and the mechanic’s job (and cost) will be doubled. 

The economy is often analogised as a car. The question is, how are we handling our check engine light? 

The emergency monetary policy committee (MPC) meeting hiking policy rates by 250 basis points on Thursday, more than 12 days ahead of the scheduled MPC meeting was a blaring check engine light if there ever was one. In an emergency meeting, the State Bank of Pakistan announced a 250 bps policy rate hike bringing the policy rate to 12.25%.

 

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Ariba Shahid
Ariba Shahid
The author is a business journalist at Profit. She can be reached at [email protected] or at twitter.com/AribaShahid

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