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Business & Finance

Expert anticipates policy rate to remain unchanged in upcoming MPC

  • “We expect the central bank to keep policy rate unchanged at 7 percent in the upcoming monetary policy statement,” said Arif Habib Limited in a report.
Updated 22 May, 2021

Financial analyst expects no change in the policy rate in the upcoming Monetary Policy Committee (MPC) of State Bank of Pakistan (SBP) to be convened on Friday, May 28.

“We expect the central bank to keep policy rate unchanged at 7 percent in the upcoming monetary policy statement,” said Arif Habib Limited in a report.

Recalling the MPC convened in March 2021, the report noted that the improvement has been witnessed in the overall domestic recovery which has aided consumer and business confidence.

“Therefore in our view SBP might consider keeping the rate unchanged in order to boost the domestic demand despite running a negative interest rate of -2pc. Moreover, the statement also hinted at a very gradual and measured monetary tightening stance when the need arise. It also highlighted the core inflation continues to appear restraint and all the headline numbers have been interlining inflation remains manageable,” stated the report.

The report highlighted that inflation rate as per SBP is likely to remain within 5-7 percent range in the medium term. “Therefore it seems likely that the central bank would let the real interest rate remain negative in the medium term,” the report said.

The report also conducted a poll to evaluate feedback from the market regarding its expectations in the upcoming MPC. The market expects the State Bank of Pakistan to keep the policy rate unchanged at 7pc in the upcoming monetary policy.

“This result is widely expected as the government intends to boost the domestic demand they believe,” said the report.

89pc of the total respondents are of the view that the SBP will keep the policy rates unchanged in while 11pc of the total respondents anticipate a rate cut off 50-100 BPS in the MPC.

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