ISLAMABAD – The State of Bank raised its key policy rate by 25 basis points to 10.25 percent on Thursday for the next two months, according to the central bank’s governor.
The move comes in the face of high fiscal and current account deficits and continuing inflation pressure, SBP Governor Tariq Bajwa said at a press conference in Islamabad.
Bajwa said stabilisation measures implemented so far were “gradually unfolding and confidence is improving amidst reduced economic uncertainty”.
But he said the fiscal deficit had yet to show signs of consolidation and although a gradual improvement in the current account deficit was visible, it still remained high and underlying inflationary pressures persisted.
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The governor said economic growth in the current fiscal year was set to slow to 4 percent from 5.8 percent last year, while inflation was projected in a range of 6.5-7.5 percent.
Earlier, the bank was considering increasing the rate by 100 basis points, but the planning and finance ministries opposed further increase due to low inflation and slowing economy.
With the fresh revision, the central bank has raised the interest rate by a cumulative 4.5 percentage points in six rounds since January 2018.
The core inflation has remained comparatively high over 8% in December 2018, the governor added.
