State Bank of Pakistan Unlikely to Alter 22% Policy Rate, Survey Shows

State Bank of Pakistan Unlikely to Alter 22% Policy Rate, Survey Shows

Karachi, December 2, 2023 – A recent survey indicates that the State Bank of Pakistan (SBP) is unlikely to alter its existing policy rate of 22 percent in the upcoming Monetary Policy Committee (MPC) meeting scheduled for December 12, 2023.

Conducted by Topline Securities Limited, the survey involved key market participants and revealed a consensus that the policy rate is expected to remain unchanged.

According to analysts at Topline Securities Limited, 63 percent of survey participants anticipate the policy rate to be held steady at 22 percent, aligning with the current rate. Meanwhile, 8 percent of respondents expect a reduction of 50 basis points, 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. Interestingly, none of the participants expect an increase in interest rates.

The latest MPC meeting on October 30, 2023, saw the SBP keeping the policy rate unchanged at 22 percent, consistent 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.

Since the last MPC meeting, several developments have unfolded, likely to be considered in the upcoming meeting. These include a rise 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.

Additionally, 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 explored 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.

Regarding the Pakistani Rupee to US Dollar parity in June 2024, 38 percent of participants expect it to range between Rs290-310, 31 percent anticipate Rs270-290, and 29 percent foresee Rs310-330. Notably, 2 percent of participants anticipate it to be below Rs270, with none expecting it to exceed Rs330.

Analysts highlight that these survey results, combined with current economic factors, suggest that the SBP is likely to maintain the policy rate at 22 percent in the upcoming MPC meeting, providing stability amidst evolving economic conditions.

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