The State Bank of Pakistan will release Monetary Policy Statement (MPS) today (Friday) for next two months. The SBP''s Central Board of Directors is scheduled to meet on June 21, 2013 for deliberation on the key economic issues to finalise the Monetary Policy. The key policy rate is stable at 9.5 percent since December 2012.
Most of economists and analysts believed that SBP will keep the policy rate unchanged for next two months because of expected inflationary pressure on the economy followed by increase in sales tax by one percent and excessive government borrowings to meet the high fiscal deficit. Although, the Consumer Price Index (CPI) has reached some 5.1 for May, however there are some indications that it would surge in the near future.
Analysts are expecting further inflationary pressure followed by food and non-food inflation during the next month mainly due to post Ramazan effects, however they believed that annual inflation will be according to target at end of current fiscal year. They have major concern over the rising government borrowing for budgetary support, as the government has borrowed over Rs 1 trillion during this fiscal year. "We think the SBP will wait for next two months to clear the picture and key policy rate may be unchanged," said Sayam Ali an economist at Standard Chartered.
He said there are some reports that Pakistan is again availing a new package from IMF and on this situation it will be difficult to cut the policy rate as IMF in its previous reports has criticised the cut in policy rate. Presently, the market is not comfortable for a cut and the rupee is also under pressure followed by massive decline in forex reserves, he added. "There are rare chances of cut in interest rate and SBP is likely to stable it at 9.5 percent," said Khurram Shahzad an analyst at Arif Habib.
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