In its accompanying statement, the SBP hinted strongly that there would be no further devaluation, or policy rate increases, unless the economic data indicated it. The policy rate hike was supposedly directed at containing inflationary pressures. Instead, production is likely to be hit by this rate hike, because it forces producers to increase their prices accordingly, if they wish to service their debt, which will now be costlier. Devaluation means cost-pull inflation, where inflation in imported goods means wage increase demands by workers, which in turn means higher costs and thus higher prices. Thus, manufacturers find they have been hit with a double whammy of higher wages and higher debt servicing at a time when they need to be able to export more.

Source: Pakistan Today July 17, 2019 16:52 UTC