Central Bank of Pakistan Raises Interest Rate by 17% to Curb Inflation

Pakistan's central bank raised the key rate by 100 basis points to 17% on Monday, as widely expected, in an effort to rein in persistently high inflation, saying price stability is critical to achieving long-term growth.

Eighteen of the 22 economists and market watchers polled by sources predicted a hike: 14 predicted 100 basis points (bps), three predicted 200 bps, and one predicted 150 bps. Four respondents predicted that rates would remain unchanged.

"The committee noted that inflationary pressures are persisting and continue to be broad-based. If these remain unchecked, they could feed into higher inflation expectations over a longer than-anticipated period," the statement said.

"The MPC stressed that it is critical to anchor inflation expectations and achieve the objective of price stability to support sustainable growth in the future."

The State Bank of Pakistan unexpectedly raised the rate by 100 basis points to 16% at its most recent policy meeting in November. Since January 2022, it has raised rates by a total of 725 basis points.