Interest rate hike likely as oil drives inflation up

KARACHI: The State Bank of Pakistan (SBP) has created room to increase its policy rate at the next monetary policy meeting, following an expected sharp rise in headline inflation after a jump in oil prices due to Middle East crisis.

Financial experts watching the unexpectedly high cut-off yields of the treasury bills in the latest auction said that a 100-basis-point increase in treasury bill returns created visible room for an interest rate hike at the next monetary policy scheduled for April 27.

The trade and industry, already crying out under the hike in petroleum prices, could hardly afford a further increase in the benchmark interest rate, is 10.5 per cent, and it was expected that the State Bank might reduce the policy rate in the Monetary Policy announced on 9 March. However, the war had started in the Gulf, and expectations of a new wave of inflation were clear, prompting the State Bank to keep the interest rate unchanged.

In the auction held on Monday, returns on treasury bills increased by up to 100 basis points. The interest rate is below 100 basis points for most of........

© Dawn Business