State Bank of Pakistan is seen keeping its key policy rate at 12 percent on Saturday as inflation is expected to rise in the remainder of the fiscal year through June because of higher oil and gas prices. Eleven of 15 analysts polled by Reuters expect the State Bank of Pakistan (SBP) to keep the key rate steady, three anticipate it will cut it by 50 basis points and one expects it to cut it by 100 basis points.
Since the start of the fiscal year last July, the central bank has cut interest rates by 200 basis points. But it kept its policy rate unchanged in the last monetary policy announcement in November. "The State Bank of Pakistan faces a difficult balancing act at the February 11 monetary policy meeting," said Sayem Ali, an economist at Standard Chartered Bank in Karachi.
"The SBP will also be concerned with the sharper-than-projected drawdown in forex reserves and record government deficit financing from domestic markets." Foreign exchange reserves fell to $16.69 billion in the week ending February 3, compared with a record $18.31 billion in July. Reserves have mainly eased due to debt repayments. The current account deficit also widened to a provisional deficit of $2.154 billion in the first six months of the 2011/12 fiscal year, compared with a surplus of $8 million in the same period last year.
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