State Bank of Pakistan (SBP) has decided to raise its Policy Rate by 50 basis points to 13.5 percent with effect from September 30, 2010.
This decision was taken at a meeting of the Central Board of Directors of the State Bank of Pakistan held under the Chairmanship of SBP Governor, Mr. Shahid H. Kardar in Karachi today.
“The monetary policy stance is formed by the consideration that the impact of continued inflation is substantial and felt by the entire economy. A tightening of the stance is thus called for in full recognition that the difficulty to contain fiscal deficit has resulted in the private sector bearing the full brunt of such an adjustment,” the State Bank explained the rationale behind the increase in policy rate in its Monetary Policy Decision.
It said that the next quarter will be crucial in forming an assessment of the effectiveness of government efforts to contain the fiscal deficit and its inflationary borrowings from the SBP and the banking system.