KARACHI: The State Bank of Pakistan (SBP) will keep the discount rate unchanged at 7 per cent in the next Monetary Policy meeting scheduled for July 27, 2021, market analysts claimed. Some analysts expect that SBP will increase the discount rate by 25-50 basis points (bps) in July’s meeting.

According to Topline Securities, the central bank will keep the policy rate unchanged in July 2021 meeting. Still, the analyst claimed, “we expect an increase in Policy Rate during 2nd half of 2021.”

The main reason behind no change in the policy rate as SBP maintained its inflation estimate for 2021 in the 7-9 percent range. It expected inflation to fall towards 5-7 percent over the medium-term gradually, the analyst claimed. 

In its report released a few days back, the SBP expected monetary policy to remain accommodative in the near term. Any adjustments in the policy rate are to be measured and gradual to achieve mildly positive real interest rates over time.

If demand-side pressures emerge as the recovery becomes more durable and the economy returns to full capacity, it would be prudent for monetary policy to begin to normalize through a gradual reduction in the degree of accommodation, the analyst said.

According to the Topline Securities report, about 89 per cent of the participants expect no change in the Policy Rate in the upcoming MPS, compared to 73 per cent in the previous poll. 7 per cent of the participants expect an increase of 25bps in the Policy Rate, while 4 per cent of the participants anticipate an increase of 50bps.

Khurram Shahzad Chief Executive Officer (CEO) Alfa Beta Core Securities said that the SBP will keep the discount rate unchanged at 7 per cent to maintain the country’s growth rate which was around 4 per cent in last fiscal year and now the government has set GDP growth rate at 4.8 per cent in the current fiscal year.

CEO Topline Securities Mohammad Sohail said that we are expecting no change in the Policy Rate in the July 2021 monetary policy meeting, however, we expect an increase in the Policy Rate during the second half of 2021.

Interestingly, none of the participants expects a cut in the Policy Rate compared to 12 per cent of participants expecting a reduction in the previous poll.

57 per cent of analysts expect PKR-USD between 160-165 by the end of 2021, while 37 per cent expect PKR-USD to be between 165-170.

Pak Rupee remained under pressure against US Dollar and traded at 162.40 for the second consecutive day after a higher than expected June Current Account deficit of $1.6 billion.


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