SBP increases interest rate to record high of 22 percent

“With this background, the MPC convened an emergency meeting to respond to these developments. The MPC decided to raise the policy rate by 100 bps to 22 percent, effective 27th June 2023,” said the central bank.

It added the decision was “necessary to keep real interest rate firmly in the positive territory on a forward-looking basis”.

The central bank sai that the decision would help “anchor inflation expectations” and “support bringing down inflation towards the medium-term target of 5–7% by the end of FY25”.

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“The MPC views that today’s decision — along with the expected completion of the ongoing IMF program and the government adhering to the target of generating a primary surplus in FY24 would help in addressing external sector vulnerabilities and reduce economic uncertainty. The Committee reiterated that it would continue to carefully monitor evolving economic developments and stands ready, if necessary, to take appropriate action to achieve the objective of price stability over the medium term,” said the SBP.

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