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KARACHI: The Governor State Bank of Pakistan (SBP), Dr Reza Baqir will unveil Monetary Policy Statement (MPS) on Tuesday (July 27) for the next two months.

The committee will meet Tuesday at SBP Karachi to review the key economic indicators for a decision about the Monetary Policy. State Bank Governor Dr. Reza Baqir will hold a press conference after the MPC meeting. However, given the Covid situation and following the precautionary measures, the SBP has decided to hold the Governor SBP press conference in virtual format through a Zoom meeting.

The Monetary Policy Committee of the SBP kept the policy rate unchanged for the last one year to support the economy. Previously, the policy rate was cut by 100 basis points to 7 percent in June 2020 and since then it remained unchanged.

Most of analysts are expecting status quo in July MPS, however they believed some rate hike during 2021. As per analysts’ expectations, some 50-100 basis points increase is likely in the policy rate during the second half of this calendar year.

On the economic front, current account deficit was declined by 58 percent to $1.8 billion during FY21. Current account, on a cumulative basis, was surplus in the July-May FY21 on the back of record home remittances inflows, recovery in exports and deferred interest payments on external debt, however, the surplus turned into deficit end of the last fiscal year due to rising industrial imports.

In addition, the total liquid foreign reserves held by the country stood at $25.128 billion mark. On inflation side, there are multiple upside risks to the inflation expectations due to rising trend in the international commodity price and upward adjustment utility tariffs by the government.

While announcing the previous policy in May 2021, the committee said that monetary policy to remain accommodative in the near term and any adjustments in the policy rate to be measured and gradual to achieve mildly positive real interest rates over time.

The MPC was of the view that the current significantly accommodative stance of monetary policy remains appropriate to ensure the recovery becomes firmly entrenched. The MPC also noted that it was important for monetary policy to remain supportive.

Copyright Business Recorder, 2021

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