The State Bank of Pakistan on Tuesday has increased its main policy rate by 10 percent to 13.25%.The rate hike was announced by SBP Governor Reza Baqir at a press conference.


State Bank Governor Reza Baqir said the new policy is made in line with new tax reforms, adding that the inflation would reduce in second half of current fiscal year.


The governor SBP said that the central bank would consider revising down the interest rate if demand softened more, and inflation eased. “The rate hike will benefit people who have parked savings in redeemable accounts at banks an in national saving schemes,” he said.


Based on these factors, the State Bank of Pakistan revised its inflation estimate for the ongoing tax year to 11-12pc. Governor SBP said: 

"If you look at the time-path of this increase, in the next few months, due to one-time factors, inflation will be higher. These have been accounted for in our estimates. In the second half of the fiscal year, according to our predictions, inflation will be lower. By the beginning of the next fiscal year, there will be a visible decline in inflation," SBP Governor said.

State Bank Governor said that the interest rate hike will help control dollarization in the economy. Citizens will prefer to keep savings in rupee rather than in dollars