Karachi: The State Bank of Pakistan (SBP) increased the benchmark interest rate from 7% to 7.25 percent in a major policy move, according to news reports. This is the first raise in two years. The new interest rate will be in force for the next two months, beginning on October 1. According to reports, the 25-basis-point rise is designed to close the gap between economic growth and rising trade deficits while also reducing inflationary pressures.

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Following a meeting of the Monetary Policy Committee (MPC), which advocated a 25 basis point hike in the interest rate, a statement was released to this effect on Monday (September 20). The MPC authorised the policy change based on recent developments and the economy’s swift rebound following the COVID-19 outage, according to the report.

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To keep the pandemic-affected economy afloat and inflation under control, the SBP cut the interest rate from 13.25 percent to 7% in June 2020. The administration chose to reintroduce these tariffs in response to increased imports and a worsening current account deficit (CAD).

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