Pakistan hikes key rate to record high of 21 percent

State Bank of Pakistan (SBP) has hiked its key interest rate by 100 basis-point to 21 percent on Tuesday, in an attempt to curb the country’s soaring inflation of 35 percent and maintain the confidence of foreign creditors.

Pakistan’s inflation has been boosted by global factors, weakening currency, energy tariff and food price inclines, as food, beverage and transportation prices hiked by 45 percent, pressuring household budgets even further.

“The Marginal Propensity to Consume considers the current monetary policy stance appropriate and stresses that today’s decision, along with previous accumulated monetary tightening, will help achieve the medium-term inflation target over the next eight quarters,” the SBP stated in a statement.

Indicators show the negative growth and massive slowdown in the economy, a more aggressive rate hike will not be of much help, said Tahir Abbas, head of research at Arif Habib limited.

The Pakistani rupee hit a record high against the US dollar, closing at 287.29, the Pakistani currency has lost over 20 percent of its value since the start of 2023.