Credit cards purchases, car financing, and home loans will cost more now, as the State Bank raised on Friday its benchmark interest rate by 1.5%.
This is the rate on which SBP gives loans to other banks. State bank policy rate has now reached 10%, its highest level in five years. The increase has beaten the forecasts of the majority of analysts surveyed by Samaa Digital. Most analysts expected a rise of 1%.
Higher rates mean that all other interest rates will increase accordingly. Borrowing for businesses will also become expensive thus discouraging new investment that needs debt financing.
The central bank has been raising its policy rate to fight inflation and achieve economic stability.
The rupee has depreciated more than 25% this year with the latest fall coming on Friday, when it fell steeply against the dollar. This will create inflationary pressures in months to come.
Likewise, the country is facing a double loss whereby our imports far exceed our exports, and the government faces an annual loss of Rs2.2 trillion because it spends more and earns less. The imports-led growth is not sustainable thus the rate has gone up.
This will slow down economic growth and keep job market under pressure. In simple terms, expect fewer jobs in coming months and don’t be surprised if you don’t get an increment.