More rate hikes may follow
The State Bank of Pakistan's (SBP) decision to raise its policy rate by 50 basis points to 12% has cast a shadow over the economic recovery, with economists warning that persistent energy and food price pressures could keep monetary policy tight while higher borrowing costs weigh on private investment, employment and growth. The Sustainable Development Policy Institute (SDPI) economist Dr Abid Qaiyum Suleri said the 50-basis-point increase reflected growing concerns over inflation, particularly rising energy and food prices. With inflation reaching 10.3% in September, the central bank wanted to prevent temporary supply shocks from turning into persistent inflationary pressures.