Pakistan hikes interest rates by 300 basis points

Borrowing costs hit highest level since 1996, reaching 20%

By Tuba Sahin

ANKARA (AA) – The State Bank of Pakistan on Thursday raised the policy rate by 300 basis points, exceeding market forecast.

The policy rate was hiked to 20% to tame surging inflation, the highest since October 1996.

The market estimate was a 200-basis-point rise.

"This (rate hike) will help anchor inflation expectations and steer inflation to the medium-term target of 5-7% by end of fiscal year 2025," read a statement by the central bank.

Pakistan's annual consumer inflation rate rose to nearly 50-year high of 31.5% in February.

The bank said the near term inflation outlook worsened due to the recent fiscal adjustments and exchange rate, therefore revising inflation expectations upward.

The average inflation this year is now expected to range between 27%-29%, up from the November 2022 projection of 21%-23%.

In its last policy meeting in January, the bank increased the policy rate by 100 basis points to 17%.

Kaynak:

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