Sri Lanka’s central bank stunned markets by raising its benchmark policy rate by an outsized 100 basis points, as policymakers scrambled to stem inflation and support a currency buckling under soaring energy prices, Reuters reports.

The Central Bank of Sri Lanka CBSL) raised the overnight policy rate to 8.75 per cent from 7.75pc, blaming higher inflation and a depreciating rupee due to the US-Israeli war on Iran.

Sri Lanka, fully reliant on imported fuel, has been battered by the Iran war-driven energy shock that has forced a 40pc fuel price hike, rationing, and even public holidays on Wednesdays.