More Central Bank Rate Hikes in Pakistan, Israel, and Ghana

May 23, 2022

In all of these instances, tightening interest rate cycles inspired by accelerating inflation had begun prior to today’s moves.

  • There have been five increases of the State Bank of Pakistan‘s policy interest rate since September 2021, when the rate was raised 25 basis points from 7.0% to 7.25%. hikes followed of 150 basis points in November, 100 bps in December, 250 basis points last month and 150 bps today. That lifts the rate to a 12-month high of 13.75%, and the net change of 675 basis points exceeds the incremental rise of inflation from 9.0% to 13.4% since August 2021.
  • The Bank of Israel‘s policy interest rate had been at 0.10% from April 2020 until a 25-basis point hike in April 2022, and that move was followed now by a greater-than-forecast 40 basis point increase now. Israeli CPI inflation, which has climbed from 1.5% in May 2021 to 4.0% last month, has risen more sharply than the net 65-basis point increase in the central bank interest rate.
  • Consumer price inflation in Ghana has rose from 7.5% in May 2021 to 23.6% in April 2022. Today’s hike of the Bank of Ghana‘s policy interest rate to 19.0% from 17.0% followed earlier increases of 250 basis points in March and 100 basis points last November. The rate had been at 13.5% from May 2021 until that initial tightening. At 19.0%, the Bank of Ghana’s interest rate still lies significantly below inflation and has failed to rise as much as inflation has, but the same can be said about many central banks including the Federal Reserve.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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