Karachi, September 12, 2023 – The State Bank of Pakistan (SBP) has officially disclosed the date for its upcoming Monetary Policy Committee (MPC) meeting.
The SBP stated that the MPC will convene on Thursday, September 14, 2023, at the SBP headquarters in Karachi to deliberate on the nation’s monetary policy. Following this crucial meeting, the SBP will release the Monetary Policy Statement to the public on the same day.
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Market experts and analysts are closely watching this event with heightened anticipation. There is a widespread expectation that the SBP may raise the benchmark policy rate by a substantial 200 basis points, potentially pushing it to a record high of 24 percent from the current 22 percent.
A recent survey conducted by Topline Securities has revealed that a majority of respondents predict the State Bank of Pakistan (SBP) will take this significant step. In its last policy meeting on July 31, 2023, the SBP opted to maintain the benchmark policy rate at 22 percent. However, evolving economic conditions since then have prompted heightened expectations of a substantial rate hike.
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According to the survey, approximately 54 percent of participants anticipate a 200-basis-point increase, while 18 percent expect a more moderate hike of up to 100 basis points. An additional 12 percent foresee a 150-basis-point increase, and 10 percent are bracing for a substantial 300-basis-point surge. Interestingly, only 7 percent of respondents foresee no change, and none expect an increase in the policy rate exceeding 300 basis points.
These expectations are rooted in several key developments. Pakistan recently transitioned from a current account surplus to a deficit of US$809 million in July 2023. Furthermore, local fuel prices have surged by 19 percent, international oil prices have climbed by 6 percent, and the Pakistani rupee has depreciated by 6 percent against the US dollar.
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Heightened concerns regarding inflation and the outlook for the current account balance have translated into increased yields in Treasury Bill (T-Bill) auctions. Cut-off yields for T-Bills now stand at 24.5 percent, 24.8 percent, and 25.1 percent for maturities of 3, 6, and 12 months, respectively. The secondary market has also witnessed notable yield increases for both T-Bills and Pakistan Investment Bonds (PIBs) since July 31, 2023.
The SBP’s commitment to data-driven policy decisions, coupled with the IMF’s endorsement of a tight and proactive monetary policy approach, has further stoked expectations of an impending interest rate hike. The outcome of the MPC meeting on September 14, 2023, will undoubtedly have far-reaching implications for Pakistan’s economic landscape. Stakeholders and market participants will be closely monitoring the SBP’s decisions and their potential impact on the country’s financial stability.
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