KARACHI: State Bank of Pakistan (SBP) is expected to increase 50bps (bps)to 7 per cent in discount rates in the Monetary Policy due to be announcedtoday, market analysts believe.

According to a press release issued on Thursday, SBP Governor Tariq Bajwawill unveil the Monetary Policy Decision at a press conference later today.The press conference will be held at SBP Learning Resource CentreAuditorium, SBP Head Office, I.I. Chundrigar Road, Karachi.

Al-Habib Capital Market Analyst Hasnain Imam anticipates that the SBPMonetary Policy Committee (MPC) may raise its policy rate by 50bps to 7 percent. The central bank may build the case for this monetary policy stanceon rigid high Consumer Price Index (CPI) (NFNE). Meanwhile, broad money(M2) growth slowing due to deteriorating NFAs of the banking system andrising current account deficit (CAD) may induce the central bank to adoptan accommodative monetary policy and tight monetary policy to help manageaggregate demand.

CPI (General) has remained modest at 3.92 per cent during 2017-18 but hasbegun to show signs of increase since April 2018 wherein it inched up to3.68 per cent, rising to 4.19 per cent in May 2018 and surging to 5.21 percent in June 2018 on the back of increase in food & non-alcoholic beveragessegment of CPI (General) inflation.

On the contrary analysts believe that CPI’s (NFNE) inflexibility is moreworrisome which stood at 7 per cent during both April 2018 and May 2018inching up to 7.10 per cent in June 2018 despite a 50bps hike in policyrate in May 2018 indicating rising aggregate demand and inflationexpectations within the economy stemming from forecasted surge in food andfuel prices due to recent, depreciation of Pak Rupee and increasing pricesof domestic petroleum products.

The analyst said Pakistan’s CAD stood at $15.961 billion during elevenmonths of 2017-18 against $11.140 billion last fiscal year, up by awhopping 43 per cent. Nonetheless, analysts foresee Pakistan’s 2017-18 CADscaling to $17.5 billion.