KARACHI: The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) has kept the key interest rate unchanged at 7% for the next two months.
A majority of financial market participants had expected the MPC to keep the key interest rate unchanged.
“Keeping in view SBP’s medium-term inflation projection and its stance to support domestic demand, we expect the policy rate to remain unchanged at 7% in July’s MPS,” said Arif Habib Limited (AHL) in a research note circulated earlier.
As per a survey poll conducted by AHL, 78% of the total respondents are of the view that the SBP will keep the policy rate unchanged in July’s MPS.
Similar results were shared by Topline Securities in its market poll. “We are expecting no change in the policy rate in the Jul-2021 monetary policy statement (MPS), while we expect an increase during 2H2021 (second half of 2021),” said Topline in its research note.
Majority expect status quo in upcoming monetary policy announcement
In May, the central bank had also kept the key interest rate at 7% for the next two months as it expected monetary policy to remain accommodating in the near term and any adjustments in the policy rate will be measured and gradual to achieve mildly positive real interest rates over time.
The policy rate was last changed in June 2020, when MPC decided to cut it by 100 basis points to 7 percent and since then it has remained unchanged. Back then, MPC noted that the priority of monetary policy has shifted toward supporting growth and employment amid a slowdown in the domestic economy.
Meanwhile, on the external front, Pakistan closed FY21 with historic high levels of exports (goods) and remittances i.e. $25.3bn and $29.4bn, respectively. However, the current account posted a deficit of $1.9 billion in FY21, with a huge $1.6 billion deficit recorded alone in the month of June 2021. However, on a YoY basis, current account deficit has come down by 58% during FY21, the lowest deficit after 10 years. A surplus of $214 million was posted FY11.
