The State Bank of Pakistan (SBP) could increase the key policy rate by 200 basis points (bps) in its upcoming Monetary Policy Committee (MPC) meeting on September 14, said a brokerage house.

Topline Securities, in its report released on Friday, said it expects the SBP to raise the key policy rate by 200bps to 24%. The key policy rate already stands at a record high of 22%.

“We expect an increase of 200bps, taking the rate to 24% in the upcoming MPC meeting,” said Topline.

It said that since the last MPC, major developments have taken place.

“These include: (1) Pakistan posted a current account deficit of $809 million in July 2023 after four consecutive months of surplus, (2) local fuel (petrol & diesel) prices have increased by around 19%, (3) international oil prices in US$ have risen by 6%, and (4) rupee has fallen by 6% against the US dollar,” it said, adding that the factors are likely to be considered by in the upcoming MPC.

As per the survey conducted by Topline, 54% of participants expect interest rates to increase by 200bps, while 18% of participants see an increase of up to 100bps in the policy rate.

Moreover, 12% see interest rates increase by 150bps, and 10% expect a 300bps increase, while the remaining foresee no change.

“We also believe that the SBP may revise their inflation targets upward from the previous range of 20-22% for FY24,” said Topline.

Responding to a query on PKR/USD parity outlook in the inter-bank market by Jun-2024, Topline shared that 38% of the participants anticipate PKR/USD parity to range in Rs320-340 by June 2024.

Around 25% expect it to be around Rs340-360 while 21% expect it to be around Rs300-320. On other hand, 12% expect it to be below Rs300, while 5% expect it to be above Rs360.

“We also expect PKR/USD in interbank market to be in range of Rs320-340 by Jun-2024,” said Topline.