And the central bank does seem to have a hammer in the shape of interest rates hikes. In its latest Monetary Policy Statement, the State Bank of Pakistan (SBP) announced a 100 basis point hike in the policy rate to 17 percent, citing persistent inflationary pressures and the need to anchor inflation expectations. - Advertisement -It’s also worth noting that the interest rate hike may come at the cost of further slowing down economic growth. The SBP’s decision to increase interest rates is understandable given the current inflationary pressures, because it seeks to ‘anchor’ inflation around a particular range of percentage. Neoclassical economics centres around the management of expectations; the central bank’s interest rate hikes aren’t as hamfisted as they appear.
