The Pakistan Institute of Development Economics (PIDE) has advised the State Bank of Pakistan (SBP) to keep the interest rate unchanged at 10.5 per cent.
It has also cautioned that any further rise in oil prices, an increase in inflation, or a fall in the value of the rupee may lead to an increase in the interest rate.
The Monetary Policy Committee of the SBP is due to meet tomorrow. In a statement issued a day ahead of the meeting, PIDE said the rise in inflation in March to 7.3 per cent in urban areas and 8.4 per cent in rural areas is a matter of concern.
It said the increase is largely driven by higher food and transport costs, adding that any reduction in the interest rate under such conditions may prove risky.
The statement further noted that global oil prices may rise due to the prevailing war situation. Tensions in the Strait of Hormuz are increasing transportation and insurance costs, it added.
In view of these factors, it recommended that the interest rate be maintained at its current level rather than altered.
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