In a surprise move, Pakistan’s central bank--the State Bank of Pakistan--raised interest rates by 250 basis points, or 2.5 percent, following an emergency meeting of the Monetary Policy Committee, as escalating political chaos threatens to spill over into a fullblown economic crisis, reported Bloomberg.
As per the report, the key interest rate now stands at 12.25 percent, the central bank said in a statement. This makes the real rate “mildly positive” and will help preserve external and price stability, it said.
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
“Heightened domestic political uncertainty” contributed to a 5 percent depreciation in the rupee, triggered a surge in local bond yields as well as Pakistan’s Eurobond yields and CDS spreads, the central bank said, per Bloomberg's report.
First Published: Apr 7, 2022 5:52 PM IST
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