A majority of market participants expect status quo in the key policy rate in the Monetary Policy Committee (MPC) meeting of the State Bank of Pakistan (SBP) scheduled for November 25, according to a poll conducted by brokerage house Topline Securities.

The brokerage house, which itself expects the SBP to maintain the rate unchanged at 15 percent, was of the view that the policy rate is now at its peak, “where we can see a decline in 2HFY23”.

According to the survey result, an overwhelming 79 percent of the participants expected no change in the policy rate. Around 16 percent of the participants anticipated an increase whereas 5 percent expected a decrease in the policy rate.

Responding to the question on policy rate by the end of FY23, majority think the policy rate will be less than what it is now by June 2023. Around 35 percent of the participants expected the policy rate to be in the range of 14-15 percent, while 27 percent expected policy rate to be in the range of 13-14 percent, and 19 percent of the participants anticipated it to be in the range of 12-13 percent by June 2023.

The policy rate has been raised by a cumulative 800 basis points since September 2021.

Last month, the Monetary Policy Committee maintained the key interest rate at 15 percent.

In terms of the outlook for Current Account Deficit (CAD), 62 percent of the participants expected CAD to be in the range of $8-$12 billion in FY23, while 21 percent of the participants expect CAD to be below $8 billion in FY23. Around 16 percent expected CAD to be over $12 billion in FY23.

The brokerage house highlighted that CPI inflation increased to 26.6 percent in October as compared to 23 percent in the previous month, which was primarily due to a major adjustment in electricity tariffs.

Furthermore, imports in October saw a 13 percent contraction.

“This is likely to keep a check in CAD going forward and will be a key driver in SBP’s monetary policy stance,” said the brokerage house.

“Moreover, floods and monetary and fiscal tightening measures have led to a slowdown in aggregate demand which could lead to SBP opting for status quo, we believe,” it added.


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