The State Bank of Pakistan (SBP) will likely keep its monetary policy rate unchanged at 7% for the fourth time in a row following a surge in coronavirus cases in the last three months, market analysts predict.

SBP’s monetary policy committee will meet again on Friday, March 19 to announce the policy for the next two months. In the last Monetary Policy Statement, the Central Bank kept the discount rates unchanged at 7%.

“We expect no change in the rate even though there is a rise in both T-bill and KIBOR. Following the International Monetary Fund (IMF) conditions and rising commodity prices, the interest rates in Pakistan may rise gradually,” said Mohammad Sohail, CEO of Topline Brokerage House.

Muzammil Aslam, CEO of Tangent Capital Advisory stated that “no change” in the interest rates is to be expected in the upcoming monetary policy.

Khurram Shehzad, CEO of Alpha Beta Core, also denied the possibility of any changes in the policy or discount rates in the recently announced monetary policy.

“I feel it will remain unchanged as the coronavirus is still present in the country,” stated Jawwad Rauf, Investment Banking Consultant at Intermarket Securities Limited.

Other analysts say that the expectation of an increase in inflation will lead to a price hike, while investors seek a safe haven for investment following low discount rates.

Interest rates are likely to go up from the first half of the next fiscal year 2021-22, several analysists believe.

Following the low discount rate policy of the SBP, the Pakistan Large Scale Manufacturing (LSM) index touched its second-highest level of 175.15 in January 2021. Previously the index reached a high of 175.17 in March 2018.

The LSM Index was up 5.36% on MoM basis and 9.13% YoY in January 2021.


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