MPC hikes policy rate to 17%

Targeting inflation expectations and price stability stated as the key reasons. Pakistan becomes country with 13th highest interest rate in the world

The State Bank of Pakistan (SBP) in a much anticipated MPC meeting has raised the policy rate by 100 basis points. The effective policy (target) rate now stands at 17%, which is its highest level in over 25 years.

With this latest development, Pakistan now stands as the country with the 13th highest interest rate in the world, with only countries of the likes of Iran, Sudan, Sierra Leone, Ukraine, Argentina and Zimbabwe ahead of it. The decision was prompted by higher than expected inflation rates and inflation expectation. 

Deciphering the Monetary Policy Statement

The monetary policy statement stated that inflationary pressures have been on the rising trend, despite a tight monetary policy. The inflationary pressure is stated as “broad-based” and “persistent”, and it is deemed critical to anchor this pressure  or long-term sustainable growth. The statement added that “short-term costs of bringing down inflation are lower than the long-term costs of allowing it to become entrenched”.

The MPC statement noted that core inflation had still been on a rising trend. This means that non-food, non-energy inflation, that has little to no relation to exogenous shocks, and should have otherwise stayed within the target could still not be tamed at the 16% mark. The statement also took note of the fact that the inflation outlook was also on the rise causing the risk of more inflation. 

The committee also stated that, “the global economic and financial conditions broadly remain uncertain in the near-to-short term”, and an expected economic slowdown and fall in the global demand could mean even worse circumstances for exporters.

The MPC statement, on its outlook of the real sector notes that the “downside risks on the SBP’s growth outlook for this year have increased” owing to shutting down of various production cuts and supply chain constraints faced by the industries. This means that the low growth rate target set by the state bank might end up being lower than anticipated. The MPC has noted moderate economic activity in response to policy tightening, and “exogenous shocks” like the floods. 

The MPC statement, in its assessment of the external sector, also states that the “effective implementation of energy conservation measures and appropriate pricing of petroleum products is critical for much-needed reduction in energy imports”. The statement regards the 60% reduction in CAD over December, a result of tight policy and another factor that the statement refers to as, “administrative measures”. 

However, “the MPC (also) views that the completion of the pending 9th review under the IMF’s EFF (to be) critical for reducing uncertainty and unlocking multilateral and bilateral inflows.)

The MPC also states that “the current fiscal stance is inconsistent with monetary tightening”. The statement points out that the FBR tax collection grew slower than the budget target.

With a medium term inflation target of 5-7% for December 2024, the MPC aims to control the inflation expectations. A feat that is increasingly difficult to achieve where the December 2022 CPI inflation was recorded at over 24%.

 

- Advertisement -
Shahnawaz Ali
Shahnawaz Ali
The author is a Finance journalist at Profit and can be reached via email at [email protected] and via twitter @shahnawaz_ali1

32 COMMENTS

  1. A MUST READ FOR ANYONE WHO HAS EVER FALLEN FOR CRYPTO SCAM BEFORE

    Another Successful Bitcoin Recovery, My husband and I are another successful client of RecoveryMasters among many. I read countless positive reviews about how they have been using their Recovery expertise to help people achieve their happiness back by recovering their scammed or lost Bitcoin and assets from fraudulent and posers of Cryptocurrencies trading companies. After reading many of the wonderful services they render, I had to contact them because my husband was seriously defrauded by some scammers online, it all ended in goodwill as we were able to recover what we thought we had lost to scammers. Contact them on email ([email protected]) or whatsapp +1(551) 202-23-35

  2. I never thought I could get scammed of my Bitcoin , I never new these investments were fake . I never knew I was getting lured into loosing my money , I was depressed and in anger but all thanks to Adam Wilson for the help and professional service offered to me in my time of need . Thanks to Kate for sending me this contact mail. Adamwilson . Trading {aT} Consultant . Com /WhatsApp +1870-345-7937
    Who helped me recover my lost money from Bitcoin investment . I couldn’t believe it..

    • Hi James,

      do you really could recover your funds with help of Mr. Adam Wilson?

      With kindly regards

      Jolanta M. from Norway

  3. CONTACT INFO EMAIL: Wizardwebrecovery(@)programmer(.)net
    WHATSAPP: +1 (917) 725-3296

    For outstanding and competent investigation services. My husband’s phone was hacked, and I contacted Wizard Web Recovery to handle it. They significantly exceeded my expectations. They assisted me in obtaining the data I required to prove his covert affair, including WhatsApp, Facebook, text messages, call logs, and even phone conversations. The first time we spoke, we had a lengthy phone session during which they provided me with every option they could think of for resolving my situation and even suggested that I explore other possibilities before employing them. I’m delighted I made the choice to hire them. To all of you faithful lovers out there: don’t be afraid to notify Wizard Web Recovery if you have a dishonest mate.

  4. Yes i am totally agreed with this article and i just want say that this article is very nice and very informative article.I will make sure to be reading your blog more. You made a good point but I can’t help but wonder, what about the other side? !!!!!!THANKS!!!!!!

  5. How to Recover Stolen Cryptocurrencies And Stolen Bitcoin

    After falling victim to a cryptocurrency investment scam, my family and I were left with nothing after these swindlers stole $205,000 in USDT and Bitcoins from us. We were so lucky to come across a post about RecoveryMasters, a cryptocurrency and funds recovery Hackers with plenty of experience in cybersecurity. RecoveryMasters was able to recover all of our funds, and with the information we provided, they were tracked down and reported to the appropriate authorities. I highly recommend RecoveryMasters for your cryptocurrency recovery.
    l will always recommend RECOVERY MASTERS Contact them on Email: ([email protected]) or whatsapp +1(551) 202-23-35

LEAVE A REPLY

Please enter your comment!
Please enter your name here

- Advertisement -

Must Read

Expected additional FED on carbonated beverages alarms industry

ISLAMABAD: In a letter addressed to the Federal Board of Revenue (FBR) on February 1, 2023, the Ministry of Industries and Production highlighted Pakistan’s...