The State Bank of Pakistan has moved up key interest rates by a massive 300 basis points (bps), the highest figure touched since 1996.

The Monetary Policy Committee (MPC) — which was constituted as a statutory committee under the State Bank of Pakistan Act — decided to increase the policy rate to its highest level since October 1996 in an attempt to "anchor inflation expectations as it is critical and warrants a strong policy response", reports The News International.

The central bank raised the benchmark interest rate by 300 bps today taking the total increase to 1,050bps since January 2022 to counter rising inflation.

It should be noted that the MPC meeting was originally scheduled for March 16, 2023, but the SBP decided to "prepone" it to deal with emerging risks to the economy including a record inflation number, which clocked in at a nearly 50-year high of 31.5% in February.

“During the last meeting in January, the committee had highlighted near-term risks to the inflation outlook from external and fiscal adjustments,” the Monetary Policy Statement (MPS) read. It further mentioned that most of these risks have materialised and are partially reflected in the inflation outturns for February.

The national inflation calculated on the basis of the consumer price index (CPI) has surged to 31.5% on an annual basis, while core inflation rose to 17.1% in urban and 21.5% in a rural basket in February 2023.