KARACHI: The State Bank of Pakistan’s (SBP) board of directors is scheduled to meet on Saturday to fine-tune monetary policy for the next two months set to be unveiled on the same day (Nov 15).
Prior to the BoD meeting, the SBP Advisory Committee on Monetary Policy will meet to deliberate on key economic issues and will recommend a decision to the board.
The SBP, in the previous monetary policy, kept the policy rate unchanged at 10 percent ahead of risks to balance of payments due to uncertainty surrounding the expected foreign inflows and negative inflation outlook.
Analysts are of the opinion that all quarters of the economy are showing an improved picture as inflation is declined, government borrowing and current account deficit is per expectations and likely to decline in the coming month following the release of IMF tranche and lower oil prices in the world market. Similarly, remittances are posting healthy growth and reserves have risen to $13.4 billion. Therefore, a rate cut is necessary to provide relief to the private sector.
They, however, says that despite a strong base for rate cut supported by lower inflation, the SBP is most likely to defer it for the next two months as the IMF was going to release $1.1 billion.
Experts and economists say that the market is expecting a minimum cut of 50-100 basis points in the upcoming monetary policy as all economic indictors are in favour of a rate cut.
“If the interest rate is not reduced, it means the government is still under the IMF pressure and taking dictation for economic policies,” they pointed out.
Pakistan Bureau of Statistics (PBS) recently released the CPI figure, according to which the CPI for October-14 and 4MFY15 was clocked at 5.82 percent YoY and 7.09 percent YoY respectively, while core inflation CPI (Core NFNE) reached 7.8 percent YoY in October-14. Similarly, the annual CPI for the remaining period of FY15 is likely to fall in the range of 7-8 percent, thus revealing real interest rates at 2.0 percent to 3.0 percent.
