The State Bank of Pakistan (SBP) will announce the Monetary Policy on Saturday for next two months. Ashraf Mehmood Wathra, Governor State Bank of Pakistan, will chair the meeting of the Independent Monetary Policy Committee on November 26, 2016 at SBP head office to take a decision on key policy rate.
The SBP is maintaining the policy rate at 5.75 percent since May 2016, when the policy rate was slashed by 25 basis points (bps) on improved macroeconomic conditions.
The market is expecting that the SBP will keep the policy rate unchanged for next two months on deteriorating external account situation. With an increase of 63 percent, the current account deficit rose to $1.762 billion in July-October of FY17 compared to $1.078 billion in the same period of FY16.
"Although inflation is under control and foreign exchange reserves are also at a reasonable level, the SBP may continue status quo for next two months due to pressure on current account," said Muhammad Suhail, CEO of Topline Securities.
Shahid Iqbal vice president money market said the market is expecting no change in the policy rate for next monetary policy to be announced on Saturday. However, he suggested a 25 bps cut in the target rate, besides keeping the discount rate stable at 6.25 percent.
Based on macroeconomic fundamentals and global commodity outlook, the SBP already expects that inflation will be in the range of 4.5 to 5.5 percent at the end of FY17, against the target of 6.0 percent set by the government. Assuming higher international oil prices for FY17 (ie, US $48/bbl, compared to US $42/bbl in FY16), the expected increase in inflation during the year would stem primarily from the normalisation of fuel inflation in the country.
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