Pakistan's inflation increases to 31.5%, the highest level in almost 50 years.

The State Bank of Pakistan raised the key policy rate by 300 bps to 20% due to rising inflation.

In this off-cycle meeting, investors had anticipated that the State Bank of Pakistan would increase its main policy rate by 200 basis points. The State Bank of Pakistan's key rate is currently 20%, which is the highest level since October 1996.

The bank increased the rate to 17% at its most recent policy meeting in January by 100 basis points. Since January 2022, it has increased rates a total of 1,025 basis points.

A spokesperson for the Pakistan Bureau of Statistics told Reuters that February's rate of 31.5% was the highest since 1974 and noted that the yearly average inflation for the fiscal year 1973–1974 was 32.78%.

The government is undertaking belt tightening, increasing taxes, and allowing the rupee to depreciate to secure more funding from the IMF.

On Wednesday, the rupee lost 1.73% against the dollar, ending the day at 266.11 rupees. Since the beginning of the year, the rupee has lost nearly 15% of its value, which has increased inflation.

"This is still not the peak. March is expected to be higher. Food prices are expected to go even higher as we approach Ramadan," says Fahad Rauf, head of research at Ismail Iqbal Securities, a local brokerage firm.