Majority expect status quo in upcoming monetary policy announcement

A majority of financial market participants expect the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) to maintain the status quo (expecting the key interest rate to remain the same) in its upcoming meeting, according to a poll conducted by Topline Securities.

The MPC of SBP will meet on Tuesday, July 27 in Karachi.

A total of 62 participants took part in the 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 circulated on Friday.

SBP keeps interest rate unchanged at 7%

In May, the central bank 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.

Its meeting in May was the first after the central bank’s announcement of a half-yearly schedule on a rolling basis aimed at making the process of monetary policy formulation more transparent.

The policy rate was last changed in June 2020, when the MPC reduced it by 100 basis points to 7%.

About 89% of the participants in the poll expect no change in the policy rate in the upcoming MPS, compared to 73% in the previous poll, added the brokerage house. Around 7% of the participants expect an increase of 25 basis points (bps), while 4% anticipate an increase of 50 bps. None of the participants expect a cut.

Additionally, 64% of the participants expect an increase in the key interest rate at some point in 2021.