Pakistan increases policy rate by 100 basis points to 16 pct amid inflationary pressures


ISLAMABAD, Nov. 25 (Xinhua) -- The State Bank of Pakistan (SBP) on Friday evening announced to increase the policy rate by 100 basis points, raising it to 16 percent amid stronger inflationary pressures, said a statement.

The SBP said that the monetary policy committee of the bank held a meeting on Friday and decided to raise the policy rate by 100 basis points considering the stronger inflationary pressures which have proven to be more persistent than expected.

"It is aimed at ensuring that elevated inflation does not become entrenched and that risks to financial stability are contained, thus paving the way for higher growth on a more sustainable basis," the central bank said.

The SBP said that inflation is increasingly being driven by persistent global and domestic supply shocks that are raising costs amid the ongoing economic slowdown.

"In turn, these shocks are spilling over into broader prices and wages, which could de-anchor inflation expectations and undermine medium-term growth. As a result, the rise in cost-push inflation cannot be overlooked and necessitates a monetary policy response," said the bank.

The bank said that the short-term costs of bringing inflation down are lower than the long-term costs of allowing it to become entrenched, adding that curbing food inflation through administrative measures to resolve supply-chain bottlenecks and any necessary imports remains a high priority.

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