KARACHI: Pakistan's stock market shed more than 865 points during the trade on Monday, amid jitters from a hike in the interest rate.
Pakistan’s central bank decided on Friday to jack up key policy rate by 100 basis points to 16 percent, citing inflationary pressure on the economy which it said had not toned down yet.
But the hike sent jitters through the Pakistan Stock Exchange since it opened Monday morning.
“The market has reacted to the unexpected rise in the policy rate by 1 percent,” Ahsan Mehanti, CEO of the Karachi-based Arif Habib Corporation holding company, told Arab News.
“The appointment of the new army chief and end of long march eased off pressure at equity market, otherwise the reaction would have been much severe.”
The benchmark KSE100 index, which lost 650 points Monday morning, shed another 300 points by the afternoon. The index was at 41,972 points by the time this report was filed.
On Friday, the central bank said the decision to raise interest rate was made to ensure that elevated inflation could not get entrenched and begin to risk financial stability, hoping for higher growth on a more sustainable basis.
It said the higher inflation was driven by persistent global and domestic supply shocks that were also raising costs, amid the ongoing economic slowdown.
Pakistan’s inflation rate has hovered around historic highs in recent months and was recorded at 26.6 percent in October.
The central bank now expects the average inflation to go up to 21-23 percent during the current fiscal year (FY23), owing to higher food prices and core inflation.
Pakistan has also witnessed an economic slowdown in the wake of the recent floods that have damaged huge infrastructure and agriculture output.
