Business News

Pakistan central bank hikes interest rate, stocks sink

May 22, 2008, 12:29 GMT

Karachi - Pakistan stocks plummeted across the board on Thursday as the central bank hiked up its benchmark interest rates, analysts said. The central State Bank of Pakistan on Thursday increased the rates by 150 basis points to 12 per cent. This is the second spike in the benchmark rates, popularly known as 3-day repo, since January this year. As a result, the key KSE-100 Index of Karachi Stock Exchange fell 347.49 points or around 2.5 per cent to close at 13,627 against Wednesday's 13,974.49 points. 'Institutional investors will now avoid investing in stocks and will invest more in the secured central bank instruments,' said Asif Qureshi, head of research at Invior Securities. The SBP governor Shamshad Aktar at a press conference cited rising inflation as the main cause for hiking up rates. 'The inflation has reached at unsustainable level and the SBP is left with no choice but to increase rates,' Akhtar said. The rumours of an increase in Pakistan's benchmark discount or repo rates have been circulating in the markets since this morning, dealers say. Another reason for the decline, according to traders, are rumours of fresh taxes on banking and financial sector in the upcoming budget for fiscal 2008-2009 (July-June).

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