SBP Interest rates big increase on cards
A brokerage house has predicted that the State Bank of Pakistan (SBP) may announce a substantial 200 basis points (bps) increase in the key policy rate during its forthcoming Monetary Policy Committee (MPC) meeting scheduled for September 14. In a recent report published by Topline Securities, they anticipate the SBP will raise the key policy rate to 24%, which would represent a significant escalation from the existing record-high rate of 22%.
Topline Securities confidently asserted, "We expect an increase of 200bps, taking the rate to 24% in the upcoming MPC meeting." Their analysis is founded on several pivotal developments that have unfolded since the last MPC meeting. These include Pakistan experiencing a current account deficit of $809 million in July 2023, marking a reversal from four consecutive months of surplus.
Additionally, local fuel prices, encompassing petrol and diesel, have surged by approximately 19%, while international oil prices in US dollars have seen a 6% increase. Furthermore, the Pakistani rupee has depreciated by 6% against the US dollar. Topline Securities believes that these factors are poised to play a crucial role in the deliberations of the upcoming MPC.
Topline Securities conducted a survey, revealing that 54% of the participants in the survey anticipate a 200bps increase in interest rates. Meanwhile, 18% of participants foresee a more moderate increase of up to 100bps in the policy rate. This suggests a consensus among a significant portion of market participants that the SBP is likely to take decisive action to address the economic challenges posed by recent developments