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KARACHI: The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) will meet on Monday (July 31) to decide about Monetary Policy.

State Bank Governor Jameel Ahmad will announce the Monetary Policy decision at a press conference the same day after the MPC meeting.

In the previous scheduled meeting held on June 12, 2023, the committee kept the policy rate unchanged at 21 percent as the already taken monetary policy stances were appropriated to achieve the objective of price stability.

MPS: No good news

However, on June 26, the MPC convened an emergency meeting and decided to raise the policy rate by 100 bps to 22 percent to keep real interest rate firmly in the positive territory on a forward-looking basis.

Analysts and economists have mixed views on the monetary policy stance in the Monday’s meeting. Some analysts are expecting no change in policy rate while some are projecting 100 bps increase.

Analysts at Topline are also expecting no change in the upcoming MPC meeting. However, even if there were a 100bps change, it would not have a major impact due to the high base, they added.

The IMF in its country report has emphasized that the SBP will need to continue its tightening cycle to re-anchor expectations given that inflationary pressures are expected to persist over the coming year, including because the impact of exchange rate corrections will continue to reverberate through the economy.

Pakistan’s CPI inflation in Jun 2023 came down to 29.4 percent YoY vs. 38 percent YoY in May 2023 attributed to the high base effect from the last year along with lower food prices.

In addition, with the approval of the IMF Standby Arrangement (SBA), a number of friendly countries have released funds, which helped build the depleting foreign exchange reserves.

Copyright Business Recorder, 2023

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