Pakistan central bank raises rate 100bps to 21% to curb inflation

Pakistan's central bank raised its key interest rate by 100 basis points to its highest-ever level on Tuesday, as the cash-strapped country bids to curb soaring consumer prices.

The key rate of the State Bank of Pakistan (SBP) now stands at a record 21 per cent but consumer price inflation is also at its highest level recorded to date.

Investors polled by Reuters had mostly expected a rate hike of 200 basis points.

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Worldwide growth in consumer prices has compounded high inflation in Pakistan caused by a weakening currency, energy tariff increases and elevated food prices due to Ramadan. Pakistan's annual consumer price inflation reached its highest rate ever, at just over 35 per cent in March.

Soaring prices have put pressure on household budgets and left many desperate, with at least 16 people killed in stampedes for food aid last week.

Food, beverage, and transportation prices have all surged more than 45 per cent and the country is in talks with the International Monetary Fund to unlock its next tranche worth around $1.1 billion as part of a $6.5 billion bailout agreement reached in 2019.

In early March, the bank raised its key rate by 300 basis points to 20 per cent, exceeding market expectations, likely to meet a key requirement of the IMF for release of the pending bailout funds.