Karachi, December 8, 2023 – The State Bank of Pakistan (SBP) has declared that it will reveal the benchmark interest rate on December 12, 2023.
In a statement released on Friday, the central bank announced that the Monetary Policy Committee (MPC) of SBP would convene in Karachi on December 12 to deliberate on the monetary policy, followed by the issuance of the monetary policy statement.
During the MPC’s previous meeting on October 30, 2023, the committee prudently decided to maintain the policy rate at 22 percent, citing global market volatility. It emphasized the need to persist with a tight monetary policy stance to curb inflation.
A recent survey conducted by Topline Securities Limited gauged the expectations of key market participants regarding the upcoming MPC meeting. The consensus from the survey suggests that the SBP is unlikely to alter the existing policy rate of 22 percent.
According to analysts at Topline Securities Limited, 63 percent of survey participants anticipate the policy rate to remain steady at 22 percent, aligning with the current rate. Meanwhile, 8 percent of respondents expect a 50 basis points reduction, with varying expectations for more substantial decreases: 19 percent foresee a 100 basis points cut, 2 percent anticipate a 150 basis points reduction, 6 percent expect a 200 basis points cut, and 2 percent foresee a reduction exceeding 200 basis points. Notably, none of the participants expect an increase in interest rates.
The SBP’s decision in the October 30, 2023 meeting to keep the policy rate unchanged at 22 percent was in line with market expectations. The committee emphasized the significantly positive real policy rate on a 12-month forward-looking basis, deeming it appropriate to bring inflation on a downward trajectory, particularly in the second half of fiscal year 2024.
Several developments have occurred since the last MPC meeting and are likely to be considered in the upcoming meeting. These include a surge in Consumer Price Index (CPI) inflation for November 2023 to 29.2 percent, a Current Account Deficit of US$74 million in October 2023, a decline in local fuel prices, a 7 percent decrease in international oil prices, and a stable rupee against the US dollar.
Furthermore, cut-off yields in recent treasury bills auctions have declined, with secondary market yields on 6-month T-Bills and 3-year PIBs showing a downward trend.
The survey also delved into participants’ outlook on the policy rate in June 2024. The majority (54 percent) anticipate the policy rate to be in the range of 18-20 percent, while 33 percent foresee it in the range of 16-18 percent. Only 6 percent expect the rate to be in the 20-22 percent range, and another 6 percent anticipate it between 14-16 percent.
As the market eagerly awaits the SBP’s decision on December 12, analysts suggest that the central bank will carefully weigh these factors to determine the appropriate course for the benchmark interest rate, considering its impact on the nation’s economic landscape.
