Pakistan’s central bank raised its key policy interest rate by 100 bps to 22.0% to keep inflation expectations in check. While recent months have seen a moderation in inflation, the MPC aims to further reduce inflation towards the medium-term target range of 5-7% by the end of the fiscal year 2025. The decision was driven by the country’s revised annual budget approval, which seeks to secure a crucial bailout from the IMF as the existing program will expire on June 30. Furthermore, relaxation in imports may result in a higher-than-expected pass-through of exchange rates to domestic prices.