Pakistan’s central bank boosts key rate to 21%.

Pakistan's central bank boosts key rate to 21%.
Image: Reuters

Tuesday, Pakistan’s central bank boosted its key interest rate by 100 basis points to a record 21% in response to growing consumer prices.

As a consequence of consumer price inflation hitting a record annual level of little more than 35% in March, the State Bank of Pakistan (SBP) has hiked interest rates by 50 basis points, but investors polled expected a far greater rise of 200 basis points.

In Pakistan, significant inflation results from a mix of reasons, including a weaker currency, increased energy charges, and higher food prices during Ramadan.

Last week, at least 16 people were killed in stampedes for food aid as a consequence of the 45% rise in the price of food, drinks, and transportation.

“The MPC finds the current monetary policy stance to be appropriate and emphasizes that today’s decision, in conjunction with prior cumulative monetary tightening, will help reach the medium-term inflation aim over the next eight quarters,” the SBP added.

Since the start of 2022, the SBP has lifted the key rate by 1025 basis points (bps).

After losing more than 1 percent against the dollar, the rupee reached its all-time low of 287.29 before the end of the day. It has lost more than 20% of its value since the beginning of the year.

“The majority of recent high-frequency indicators indicate negative growth and a serious economic slump. Hence, a substantial rise in interest rates will have little positive impact “Tahir Abbas, director of research at Arif Habib Ltd, says.

The administration is negotiating with the International Monetary Fund to release the next $1.1 billion payment of a $6.5 billion rescue agreement reached in 2019.

To meet a crucial IMF requirement for the release of bailout funds, the bank boosted its benchmark rate by 300 basis points to 20% at the start of March, above market expectations.

In its statement, the SBP highlighted the need of completing the ninth review of the IMF program in order to replenish foreign currency reserves.

About News Team

Hi, I'm Alex Perez, an experienced writer with a focus on lifestyle and culture news. From food and fashion to travel and entertainment, I love exploring the latest trends and sharing my insights with readers. I also have a strong interest in world news and business, and enjoy covering breaking stories and events.

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