State Bank of Pakistan (SBP) may increase the benchmark policy rate by 200 basis points to 22 per cent in monetary policy statement scheduled on April 04, 2023.
Previously, the SBP on March 02, 2023 already increased the policy rate by 300 basis points to 20 per cent.
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 (92.5 per cent) expects policy rate to increase by atleast 100bps. Out of these, 63 per cent participants expect a 200bps increase, and 5 per cent participants expect a 300bps increase. 8 per cent participants expect no change in policy rate.
In response to the question on IMFs 9th review, 15 per cent participants do not expect a staff level agreement to happen with the IMF.
Only 16 per cent participants expect a staff level agreement (SLA) within the next 2 weeks while 31 per cent participants expect agreement in 2-4 weeks and 37 per cent participants expect an agreement with the IMF after 4 weeks.
Responding to question on where do you see Policy Rate in 12 months (March 2024), 8 per cent of the participants anticipate policy rate to be above 22 per cent.
About 19 per cent participants expect policy rate to be between 20-22 per cent while 25 per cent expect policy rate to be between 18-22 per cent. On the other hand 48 per cent participants expect policy rate to be below 18 per cent of which 18 per cent participants expect policy rate below 16 per cent.
Consumer Price Index (CPI) has also increased by 31.5 per cent YoY in Feb 2023 as compared to 27.6 per cent in Jan 2023. Urban core inflation (Non Food Non Energy) stood at 17.1 per cent in February 2023 vs. 15.4 per cent in January 2022. Rural Core Inflation increased to 21.5 per cent in Feb 2023 vs 19.4 per cent in Jan 2023. March 2023 CPI is likely to show an YoY increase of more than 34 per cent, we estimate.
Considering above factors, we also expect 100-200bps increase in upcoming MPC meeting considering higher than expected inflation and rupee devaluation against US dollar where we see CPI inflation in FY23 to average at around 28 per cent.
SBP in its MPC on March 02, 2023 also expected average inflation for FY23 to be in a range of 27-29 per cent.