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Pakistan's central bank raised its key interest rate by 100 basis points to its highest-ever level on Tuesday, as the cash-strapped country steped up its fight against soaring consumer prices.

The key rate of the State Bank of Pakistan (SBP) now stands at a record 21% as the country struggles with consumer price inflation that reached its highest ananual level ever of just over 35% in March.

The rupee closed at 287.29 against the dollar, its lowest ever level, after depreciating over 1% during the day.

"The MPC considers the current monetary policy stance appropriate and stresses that today’s decision, along with previous accumulated monetary tightening, will help achieve the medium-term inflation target over the next eight quarters," the SBP said in a statement.

Investors polled by Reuters had mostly expected a rate hike of 200 basis points.

Worldwide growth in consumer prices has compounded high inflation in Pakistan caused by a weakening currency, energy tariff increases and elevated food prices due to Ramadan.

Soaring prices have put pressure on household budgets and left many desperate, with at least 16 people killed in stampedes for food aid last week.

Food, beverage, and transportation prices have all surged more than 45% and the country is in talks with the International Monetary Fund to unlock its next tranche worth around $1.1 billion as part of a $6.5 billion bailout agreement reached in 2019.

In early March, the bank raised its key rate by 300 basis points to 20%, exceeding market expectations, likely to meet a key requirement of the IMF for release of the pending bailout funds.

In its statement, the SBP reemphasized that the early conclusion of the ninth review of the IMF program was critical to rebuild FX reserve buffers. (Reuters)