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Monetary Policy: SBP Increases Interest Rate by 25 Basis Points

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In a surprise move, the State Bank of Pakistan (SBP) has raised the benchmark interest rate by 25 basis points to a 15-month high of 7.25%. The interest rate has been upped for the next two months in an attempt to control the rising inflation that has severely impacted the country’s economy. The decision was taken during a meeting of the SBP’s central board of directors.

As many of them didn’t expect the interest rate to hit the roof all of a sudden rather it was expected to leave the rate unchanged. In the policy review of July, the central bank hadn’t changed the rate and kept it consistent at 7% from March to June 2020.

Moreover, for the first time in four years, during the coronavirus pandemic, the SBP slashed the interest rate by 75 basis points to 12.50% to subside the dreadful impacts of the virus on the economic structure of Pakistan and since then, SBP had maintained the status until now.

Do you think the increased rate will affect the economy?

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