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The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) is set to meet on Tuesday, December 12, 2023, to decide about the monetary policy with a majority of the analysts expecting the central bank to keep the key policy rate unchanged.

The key policy rate currently stands at a record high of 22%.

“It is anticipated that the SBP will maintain the policy rate at 22% during this meeting,” said brokerage house Arif Habib Limited in its report on Wednesday.

Similar sentiments were expressed by other brokerage houses.

In the previous meeting on October 30, 2023, the SBP maintained the policy rate unchanged at 22%, citing that the decision took into consideration the latest inflation trends.

“Since the last MPC meeting, new developments have taken place which will likely be considered by the central bank committee in the upcoming meeting,” said Topline Securities, another brokerage house, in its recent report.

“These include; (1) rise in CPI inflation for November 2023 to 29.2% from 26.8% in Oct 2023, driven by higher gas prices, (2) Pakistan posted a Current Account Deficit of $74 million in October 2023 vs $46 million in September 2023, (3) local fuel (petrol & diesel) prices have declined on average by 3%, (4) International oil prices have decline by around 7%, and (5) rupee largely remained stable against the US dollar,” it said.

Meanwhile, AHL expects headline inflation to point towards a downward trajectory during the latter half of FY24.

“The average MoM (Month on Month) rate is projected to hover around 0.6% in 2HFY24, a significant decrease from the 1.9% average witnessed in 1HFY24E,” said the brokerage house.

AHL attributed the forecast to several contributing factors, including the substantial base effect, stabilization of global commodity prices, support from the stability of the PKR against the USD, and efforts to curtail the current account deficit.

The expectation that interest rates have peaked, and are now on the downward trajectory has fueled positive sentiment at the Pakistan Stock Exchange with the KSE-100 rallying to record highs in recent sessions.

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