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Monetary policy: SBP likely to leave rate on hold today

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2 years ago

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  • SBP to issue advance calendar of MPC meetings for first half of 2023.
  • Small section of market participants did not rule out a hike or reduction.
  • Central bank increased rate by 800 basis points in 11 months.

KARACHI: The State Bank of Pakistan (SBP) is scheduled to announce its key policy rate for the next six weeks today and a majority of pundits have developed a consensus that the central bank will leave the rate unchanged at 15% in order to wait for the stabilisation of the economy.

However, a small section of market participants did not rule out a hike of 50-100 basis points or a reduction of 25-50 basis points.

More importantly, Finance Minister Ishaq Dar, who is following his old recipe of running a controlled economy, will like to see an easy monetary policy. The policy rate is a tool for the central bank to create a balance between inflation and economic growth.

The central bank increased the rate by a cumulative 800 basis points in 11 months (September 2021 to July 2022) to 15%.

The Monetary Policy Committee (MPC) maintained the rate in its previous monetary policy unveiled on October 10, 2022.

Most of the pundits aren’t expecting any rate increase because the Ministry of Finance has not indicated anything in the recent T-bill auctions.

The OMO injection is growing and it’s around Rs6 trillion. And SBP has issued recent OMOs at prevailing rates. This implies that SBP might not be thinking of any increase in the rate. The secondary market yields imply the same.

In addition, another positive development since the last MPC meeting has been the decline in international prices of major commodities such as WTI, coal, brent, steel, wheat, and Arab Light. This bodes well for our external account position, hence providing much-needed relief to our trade numbers.

To recall, in the last monetary policy statement too, the MPC stated that the existing rate prudently reflected a balance between maintaining growth post floods and managing inflation.

Moreover, as mentioned in the last statement, SBP is closely monitoring the inflation trajectory. On the inflationary front, the headline inflation continues to remain in the double-digit since November 2021 mainly on the back of an uptick in food and energy prices.

In the month of October, headline inflation clocked in at 26.6% year-on-year. However, on a month-on-month basis, inflation increased by 4.71% mainly due to fuel cost adjustment adjustments and food price hikes.

The central bank is also expected to issue the advance calendar of MPC meetings for the first half of the calendar year 2023 after today’s meeting.

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In interbank trade, the Pakistani rupee beats the US dollar.

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6 days ago

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In the international exchange market, the US dollar has continued to weaken in relation to the Pakistani rupee.

The dollar fell to Rs278.10 from Rs278.17 at the beginning of interbank trading, according to currency dealers, a seven paisa loss.

In the meantime, there was a lot of turbulence in the stock market, but it recovered and moved into the positive zone. The KSE-100 index recovered momentum and reached 116,000 points after soaring 1,300 points.

Both currency and stock market swings, according to analysts, are a reflection of ongoing market adjustments and economic uncertainty.

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Business

Phase II of CPEC: China-Pakistan Partnership Enters a New Era

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1 week ago

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The cornerstone of economic cooperation between the two brothers and all-weather friends is still the China-Pakistan Economic Corridor, the initiative’s flagship project.

In contrast to reports of a slowdown, recent events indicate a renewed vigour and strategic emphasis on pushing the second phase of CPEC, known as CPEC Phase-2, according to the Ministry of Planning, Development, and Special Initiatives.

According to the statement, this crucial stage seeks to reshape the foundation of bilateral ties via increased cooperation, cutting-edge technology transfer, and revolutionary socioeconomic initiatives.

Planning Minister Ahsan Iqbal is leading Pakistan’s participation in a number of high-profile gatherings in China, such as the 3rd Forum on China-Indian Ocean Region Development Cooperation in Kunming and the High-Level Seminar on CPEC-2 in Beijing.

His involvement demonstrates Pakistan’s commitment to reviving CPEC, resolving outstanding concerns, and developing a strong phase-2 roadmap that considers both countries’ long-term prosperity.

At the core of these interactions is China’s steadfast determination to turn CPEC into a strategic alliance that promotes development, progress, and connectivity.

Instead of being marginalised, CPEC is developing into a multifaceted framework with five main thematic corridors: the Opening-Up/Regional Connectivity Corridor, the Innovation Corridor, the Green Corridor, the Growth Corridor, and the Livelihood-Enhancing Corridor.

With the help of projects like these, the two countries will fortify their partnership, and CPEC phase-2 will become a model of global economic integration and collaboration that benefits not just China and Pakistan but the entire region.

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The inflation rate in Pakistan dropped to its lowest level.

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1 week ago

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On December 2, core inflation as determined by the Consumer Price Index (CPI) significantly slowed, falling to 4.9% in November 2024 from 7.2 percent in October 2024.

The CPI-based inflation rate for the same month last year (November 2023) was 29.2%, according to PBS data.

Compared to a 1.2% gain in the prior month, it increased by 0.5% month over month in November 2024.

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