Monetary policy: market expects no change in key interest rate

A majority of market participants expect status quo in the key policy rate in the upcoming Monetary Policy Committee (MPC) meeting of the State Bank of Pakistan (SBP), currently scheduled for November 25 (Friday), 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%, was of the view that the policy rate is now at its peak, "where we can see a decline in 2HFY23".

As per the survey, an overwhelming 79% of the participants expected no change in the policy rate.

Around 16% of the participants anticipated an increase whereas 5% of the participants expected a decrease in the policy rate. Responding to the brokerage house's second question on their view about policy rate by end of FY23, majority think the policy rate will be less than what it is now by June 2023.

Around 35% of the participants expected the policy rate to be in the range of 14-15%, 27% of the participants expected policy rate to be in the range of 13-14%, and 19% of the participants anticipated it to be in the range of 12%13% by June 2023.

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

Around 16% of the participants expected CAD to be over $12 billion in FY23.

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