Market players expect maintenance of status quo in upcoming MPC

Market players expect that the status quo would maintain and there will be no change in the policy rate, in the upcoming State Bank of Pakistan (SBP) Monetary Policy Committee (MPC).

As per a poll conducted by Topline Securities, financial market participants over the views on the upcoming monetary policy statement on January 22nd 2021 found that 75 percent expect no change in the policy rate in the upcoming MPS.

The MPC of the SBP will meet on Friday (Jan 22) at the SBP Karachi to review the economic indicators and decide about the Monetary Policy. State Bank of Pakistan (SBP) Governor Dr Reza Baqir will chair the meeting and later on announce the decision at a press conference.

A total of 94 participants took part in the latest poll compared to 72 in November 2020 poll which was conducted for November 2020 MPS. Of 94 participants, 75pc expect no change in the policy rate in the upcoming MPS. Around 88pc expected no change in policy rate in November 2020 MPS.

As per the poll, 19pc of the participants are expecting increase in policy rate. 10pc are expecting increase of 100-150bps. In last the poll only 7pc of the participant were expecting an increase in policy rate.

With respect to monetary tightening in 2021, 58pc of the participants expect monetary tightening to begin in 1H2021 (12pc in Jan, 21pc in March and 25pc in May). 26pc expect monetary tightening to begin in 2H2021, while 17pc do not anticipate a rate hike in 2021.

The firm said that they are also expecting no change in the policy rate in the Jan 2021 MPS while they do expect an increase in the policy rate by 100 BPS in May / July 2021.

“We believe the change in views towards an increase in policy rate of the participants is owing to likely restoration of IMF program over next couple of weeks wherein energy tariffs are likely to be adjusted upwards and rising international oil and commodity prices (Sugar, scrap, palm oil etc)," said Topline Securities.