Amid the surprising decision of the State Bank of Pakistan (SBP) to hike the policy rate by 100 basis points, the Pakistan Stock Exchange plunged sharply right after opening. The benchmark KSE-100 index lost over 700 points. By 9:39 am, the index dropped by 707 points (1.65 per cent) and reached 42,229 points.
The bearish trend has been attributed to the SBP’s decision to raise the key policy rate by 16 per cent (100 points) on Friday. This is the highest policy rate since 1999. In their statement, SBP said that the decision is aimed to avoid the growth of inflation and controlling the risks of financial stability. SBP added that by hiking the policy rate higher growth on a sustainable basis can be achieved.
Raza Jafri, Head of Research at Intermarket Securities, pointed out that political instability and a surge in policy rates caused the market to open in the red zone.
