KARACHI: The emergent meeting of the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) will be held on Thursday (today) with expectation of further monetary tightening to control the inflation.
Most analysts and economists are expecting that MPC to raise the key policy rate by 200bps to 19 percent aimed to reduce the risk to the economy. The continued higher inflation, Pak rupee depreciation, and commitments with the IMF lead to an increase in the key policy rate.
As per the Pakistan Bureau of Statistics (PBS), inflation surged by 31.55 percent (4.32 percent MoM) in Feb’23, largely due to an increase in transport and food item prices.
MPC meeting on March 2: market expects 200bps hike in key policy rate
As per previous announcement, the committee meeting was scheduled on March 16, 2023, however, SBP on Monday decided to convene before the schedule to address the risks to the economy.
In the previous, the committee raised the key policy rate by 100 bps to 17 percent on higher inflation outlook. The MPC meeting before the scheduled meeting is a clear indication that it will further tighten the monetary policy.
The government took a number of measures to curb imports and manage the current account deficit. However, the current account deficit is expected to increase sharply after easing import policies.
Analysts are expecting that after the increase in the policy rate, the staff level agreement with the IMF will be signed for release of $1.1 billion loan tranche of Extended Fund Facility (EFF).
Copyright Business Recorder, 2023
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