The State Bank of Pakistan has raised its policy rate by 100 basis points to 21%, citing high inflation in near to short term. The decision was made following a Monetary Policy Committee meeting where it was noted inflation in March had risen to 35.4%, with early signs it had plateaued. The rate hike is also intended to align inflation expectations with medium-term targets, and achieve price stability. The bank stated that Pakistan’s financial sector was still generally resilient, despite economic activity moderating. It also highlighted the impact of the global banking system on emerging markets such as Pakistan, which were finding it harder to access international capital markets. Sales volumes of petroleum and automobiles have decreased, while there has been improvement in the country’s current account balance, attributed mainly to a decline in imports. Despite this, the bank noted uncertainties relating to global financial conditions and the domestic political situation presented risks.
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