SBP raises interest rates by 1.5 percentage points
State Bank of Pakistan issues monetary policy for two months.
The interest rate has been raised to 8.75% in the monetary policy meeting.
The SBP says inflation and balance of payments have deteriorated since the last meeting, while the economic growth scenario has improved.
The central bank says inflation and the balance of payments are rising for local and global reasons, while higher import prices are pushing up inflation more than expected.
The SBP says that after the outbreak, supply constraints have pushed prices higher than expected, tightening monetary policy to keep inflation in check.
The central bank said the rupee had depreciated further by 3.4 per cent since the last meeting, with the US dollar appreciating against most emerging market currencies since May.
The SBP said that the normalization of interest rates and monetary policy should ease the pressure on the rupee.
The central bank added that it would be necessary to achieve budget targets to control domestic demand in the future.
The SBP says further rise in global commodity prices and official energy prices could lead to higher-than-expected inflation in the current financial year.
The central bank says the monetary policy committee is ready to closely monitor inflation, financial stability and growth and take action accordingly. The SBP has increased the number of monetary policy meetings from six to eight in one year.