What the US Fed hike could mean for Pakistan's economy

The US Federal Reserve has raised interest rates in the world’s largest economy by 25 basis points (bps), the first hike in three years. The decision aims to tackle stubbornly high inflation that has been exacerbated by rising oil prices amid the US-Israeli war on Iran. Making the announcement, US Federal Reserve Chair Kevin Warsh stressed that the hike was not influenced by financial markets. However, will the effects of the decision reverberate in Pakistan? Dawn takes a look at how it may impact Pakistan’s economy, with analysts voicing caution for the country’s own policy rate and external debt servicing. US media outlet CNBC, citing experts, noted that for global markets, a “renewed US tightening cycle could mean a stronger dollar, greater pressure on currencies elsewhere and less room for other central banks to ease monetary policy”. Mark Zandi, chief economist at Moody’s Analytics, told CNBC that the US hike and signals for another one were putting some upward pressure on the dollar and downward pressure on other currencies. This was already evident on Thursday, with the US dollar hitting a seven-week high. Shares in Asia, including MSCI’s broadest index of Asia-Pacific share