Stock market slump due to unexpected rise in interest rates. The Pakistan Stock Exchange’s benchmark SC 100 index fell over 700 points in early trade. After the central bank’s surprise move to hike the policy rate by 100 basis points. Which led to a sharp decline on Friday evening.
At 10:02 am, the 100 index reaches 42 thousand 282 points after a decrease of 654 points or 1.52 percent.
Raza Jafri says the negative trend in the market was due to the political uncertainty in the country. He is a head of research at Inter market Securities. The rise in interest rates is a result of Imran Khan’s threat to dissolve the Punjab and Khyber Pakhtunkhwa assemblies.
He adds that the situation could improve as Pakistan intends to repay its maturing sukuk bonds before schedule.
On Friday, the SBP increases the interest rate by 100 basis points, after which the interest rate reached 16 percent. Stock market slump due to unexpected rise in interest rates.
This announcement made after the meeting of the Monetary Policy Committee of the Central Bank.
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In a statement issued by the SBP, it states that inflationary pressure proved to be more and more persistent than expected. And thus pave the way for higher growth on a more sustainable basis.
The SBP says inflation is being driven by persistent global and supply shocks during the economic slowdown, which is driving up costs.
The statement adds that this situation could affect growth in the medium term, due to which cost inflation cannot be ignored and a response through monetary policy becomes necessary.
According to the SB, crop damage caused by the recent floods led to an increase in the prices of food items, leading to higher core inflation.