Pakistani and Russian Central Bank Interest Rates Undergo Big Changes in Opposite Directions
April 8, 2022
The latest batch of central bank interest rate decisions includes a 250 basis point hike in the State Bank of Pakistan’s policy rate to 12.25%. The decision was made at an emergency unscheduled meeting, accompanied by an upwardly revised 11% projected rate of inflation this year, and explicitly intended to restore a premium between the policy rate and forward-looking inflation. Officials also hope to stop the rupee from depreciating.
At a different unscheduled monetary policy meeting, the Central Bank of Russia’s Board of Directors cut that bank’s policy rate by 300 basis points to 17% from 20%. A statement explains that “today’s decision reflects a change in the balance of risks of accelerated consumer price growth, decline in economic activity and financial stability risks.” Russian growth prospects have been dealt an additional blow by newly announced western sanctions, while the ruble’s 80% rebound from a low of 143.2 per dollar to its pre-invasion level and the avoidance of a debt default create some room to relax the monetary brakes. In February the policy rate was raised by a percentage point on the 11th and then another 10.5 percentage points on the 28th, and those moves followed seven increases in 2021 totaling 425 basis points from a record low of 4.25%.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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