KARACHI: The State Bank of Pakistan (SBP) announced on Monday it is maintaining the monetary policy unchanged at 7 percent.
The central bank announced on Twitter that the SBP’s Monetary Policy Committee (MPC) is meeting today to discuss the country’s monetary policy for the next two months.
“Governor SBP Dr Reza Baqir will announce the decision today at 5pm and SBP will tweet the decision at the same time,” said the SBP.
The committee, in its last meeting, had reduced interest rates by 625 basis points to 7% between March and June to support the economic growth in response to COVID-19 challenges.
The announcement on a new rate was expected in August but was deferred till September.
Last week, analysts told media that the central bank may keep the interest rate unchanged in the upcoming monetary policy after delivering 625 basis points in a rate cut in a short span as inflation has crossed its lower range of 7%.
A study by Topline Research showed that more than 70% of respondents in a survey expected the rate to remain unchanged. It also said that only 20% of market participants voted for a rate cut.
“We anticipate the central bank to maintain a status quo and keep interest rates unchanged at 7%,” Topline Research said in a report. “Our stance is based on the initial phase of economic recovery incentivising low-interest rates, controlled external accounts, and benign near-term inflation outlook.”
“I believe SBP will take a back seat for now,” said Atif Zafar, an analyst at Topline Securities told media.
“Given the current negative real interest rate, and higher than projected inflation, we expect the SBP to adopt the wait and watch approach,” said Muzzammil Aslam, the CEO of Tangent Capital Advisors told media. “SBP will keep its focus on growth and will work on reviving the economy to its potential.”
Saad Hashemy, executive director at BMA Capital said some are expecting a cut of up to 50 basis points.
They are expecting downward inflation in the coming few months, stable rupee and likelihood of international oil prices to remain stable at the current low levels for the foreseeable future.
KASB Research expected monetary tightening to begin from March next year onwards once Pakistan’s economy stabilises and economic activity normalises to pre-COVID levels.
“Inflationary pressures are expected to pick pace from March and Pakistan,” the brokerage said. “We believe interest rates will peak around 8.5% by the end of FY2020.”
