KARACHI: A poll has shown that the State Bank of Pakistan (SBP) may increase the benchmark interest rate to 20 per cent in policy meeting on March 02, 2023.
A survey conducted by Topline Securities revealed on Tuesday that majority is expecting 200-300 basis points increase in policy rate. The existing policy rate is 17 per cent.
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SBP’s Monetary Policy Committee (MPC) meeting has preponed and now it will be held on March 02, 2023 which was earlier scheduled for March 16, 2023.
That said, in order to gauge the view on monetary policy outlook, Topline Research conducted a poll of key market participants on expectations over policy rate and key macro estimates.
As per the survey, majority of the participants (87 per cent) expects policy rate to increase by 200-300bps. Out of these, 64 per cent expects 200bps increase, and 23 per cent is eyeing 300bps increase. Out of the remaining participants, 7 per cent expects 100bps increase, whereas 4 per cent is eyeing above 300bps increase and only 1 per cent expect no change.
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In response to the question on average inflation expectations for FY23, 38 per cent of the total participants believe that inflation is likely to average above 30 per cent. On other hand, 29 per cent and 23 per cent of the participants expect inflation of 28-30 per cent and 26-28 per cent, respectively. The remaining 10 per cent of the participants expect inflation to average at 22-26 per cent.
Responding to question on where do you see Policy Rate by end of Dec-2023, 40 per cent of the participants anticipate policy rate to remain in a range of 19-21 per cent. Around 21 per cent expect it to be at 15-17 per cent and 19 per cent expect it to be 17-19 per cent. On other hand, 3 per cent expect it to be below 15 per cent.
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To highlight, since the last MPC meeting held on Jan 23, 2023, secondary market rates including T-Bill/Kibor rates have gone up by around 200bps.
Consumer Price Index (CPI) inflation have also increased to 27.6 per cent in Jan 2023 as compared to 24.5 per cent in Dec 2022.
Urban core inflation (Non Food Non Energy) stood at 15.4 per cent in Jan 2023 vs. 14.7 per cent in Dec 2022. Rural Core Inflation increased to 19.4 per cent in Jan 2023 vs 19.0 per cent in Dec 2022. Feb 2023 CPI is likely to be 30-31 per cent.
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Considering above factors, we also expect 200bps increase in upcoming MPC meeting considering higher inflation amid recent hike in fuel prices and rupee devaluation against US dollar where we see CPI inflation in FY23 to average at around 28 per cent.