KARACHI: The Pakistan Rupee (PKR) made recovery against the dollar for third consecutive day on Tuesday since the massive increase in key policy rate on April 07, 2022.
The rupee on Tuesday gained 91 paisas to close at Rs182.02 to the dollar from previous day’s closing of Rs182.93 in the interbank foreign exchange market.
The State Bank of Pakistan (SBP) on April 07, 2022 issued monetary policy statement to increase the policy rate by 250 basis points to 12.25 per cent from 9.75 per cent. The policy rate was enhanced in an emergent meeting instead of a scheduled meeting.
The rupee recovered around Rs6.16 against the dollar since the increase in the policy rate. The local currency recorded all-time low of Rs188.18 to the dollar on April 07, 2022.
The SBP noted that the recent developments necessitated a strong and proactive policy response.
Accordingly, the Monetary Policy Committee (MPC) decided at its emergency meeting today, to raise the policy rate by 250 basis points to 12.25 percent.
This increases forward-looking real interest rates (defined as the policy rate less expected inflation) to mildly positive territory. The MPC was of the view that this action would help to safeguard external and price stability.
The MPC also noted that SBP is in the process of taking further actions to reduce pressures on inflation and the current account, namely an increase in the interest rate on the export refinance scheme (EFS) and widening the set of import items subject to cash margin requirements. These items are mostly finished goods including luxury items and exclude raw materials.
The announcement of these measures is expected soon and will complement the action taken by the MPC on interest rates.