Pakistan hikes rate by massive 2.5% in emergency bid to arrest rupee freefall

In a surprise move, Pakistan’s central bank--the State Bank of Pakistan--raised interest rates by 250 basis points, or 2.5 percent, following an emergency meeting of the Monetary Policy Committee, as escalating political chaos threatens to spill over into a fullblown economic crisis, reported Bloomberg.

As per the report, the key interest rate now stands at 12.25 percent, the central bank said in a statement. This makes the real rate “mildly positive” and will help preserve external and price stability, it said.

“Heightened domestic political uncertainty” contributed to a 5 percent depreciation in the rupee, triggered a surge in local bond yields as well as Pakistan’s Eurobond yields and CDS spreads, the central bank said, per Bloomberg's report.