The MPC of the State Bank of Pakistan has decided to raise policy rate by 150bps to 13.75%.
This is the highest interest-rate level since 2011 when it stood at 14%.
In a statement, the SBP said that since the last MPC meeting, the provisional estimates suggest that growth in FY22 has been much stronger than expected.
“The MPC decided to raise the policy rate by 150 basis points to 13.75%,” it said on Monday. “This action, together with much needed fiscal consolidation, should help moderate demand to a more sustainable pace while keeping inflation expectations anchored and containing risks to external stability.
“External pressures remain elevated and the inflation outlook has deteriorated due to both home-grown and international factors. Domestically, an expansionary fiscal stance this year, exacerbated by the recent energy subsidy package, has fueled demand and lingering policy uncertainty has compounded pressures on the exchange rate.