In a recent poll conducted by Topline Securities, market participants have expressed their expectations regarding the State Bank of Pakistan’s (SBP) upcoming monetary policy announcement.
The majority of respondents believe that the benchmark policy rate will remain unchanged. The next Monetary Policy Committee (MPC) meeting is scheduled for June 12, 2023.
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The survey results indicate that 69% of participants anticipate no change in the policy rate, while 23% expect an increase. Within the group expecting an increase, 16% foresee a 100 basis points (bps) hike, and 7% anticipate an increase exceeding 100 bps. Conversely, 8% of participants expect a decline in the policy rate.
Regarding the International Monetary Fund’s (IMF) 9th review, market sentiment is divided. Around 42% of respondents expect an extension in the IMF program, demonstrating their confidence in continued support. However, 40% of participants hold a skeptical view, believing that IMF funding will not materialize. An additional 18% of respondents anticipate an agreement with the IMF Board approval before June 30, 2023.
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Looking ahead to June 2024, market participants have projected the policy rate. A significant portion, 69%, expects the policy rate to fall within the range of 16-20%. Within this range, 37% predict the policy rate to be between 16-18%, while 32% anticipate it to be between 18-20%. Furthermore, 16% of participants project a policy rate between 20-22%. Conversely, 10% believe the policy rate will fall below 16%, while 5% anticipate a rate exceeding 22%.
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Recent data reveals that the Consumer Price Index (CPI) inflation reached a record high of 37.97% Year over Year (YoY) in May 2023, primarily driven by elevated food inflation. However, analysts anticipate a gradual decline in monthly CPI inflation starting from June 2023. This downward trajectory is expected to continue over the next 12 months, primarily due to the base effect and the implementation of tight monetary and fiscal policies. Additionally, the recent decrease in petrol and diesel prices by 7-12% is expected to contribute to easing inflationary pressures in the coming months, unless significant pressures are exerted on the Pakistani Rupee (PKR).
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Considering these factors, market participants’ expectations align with the projection of no change in the policy rate during the upcoming MPC meeting. The SBP will take into account various macroeconomic indicators, including inflation trends and external program reviews, to make an informed decision on the monetary policy stance.
