A brokerage house has predicted that the State Bank of Pakistan (SBP) mayannounce a substantial 200 basis points (bps) increase in the key policyrate during its forthcoming Monetary Policy Committee (MPC) meetingscheduled for September 14. In a recent report published by ToplineSecurities, they anticipate the SBP will raise the key policy rate to 24%,which would represent a significant escalation from the existingrecord-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 isfounded on several pivotal developments that have unfolded since the lastMPC meeting. These include Pakistan experiencing a current account deficitof $809 million in July 2023, marking a reversal from four consecutivemonths of surplus.
Additionally, local fuel prices, encompassing petrol and diesel, havesurged by approximately 19%, while international oil prices in US dollarshave seen a 6% increase. Furthermore, the Pakistani rupee has depreciatedby 6% against the US dollar. Topline Securities believes that these factorsare poised to play a crucial role in the deliberations of the upcoming MPC.
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Topline Securities conducted a survey, revealing that 54% of theparticipants in the survey anticipate a 200bps increase in interest rates.Meanwhile, 18% of participants foresee a more moderate increase of up to100bps in the policy rate. This suggests a consensus among a significantportion of market participants that the SBP is likely to take decisiveaction to address the economic challenges posed by recent developments
