KARACHI: The State Bank of Pakistan is expected to further raise its benchmark interest rate at its January 23 meeting, a brokerage house poll showed on Saturday, as a result of rising inflation and declining foreign exchange reserves.
“Majority of the participants (74 percent) expect policy rate to increase by 100-200 basis points (bps),” said Topline Research, citing a poll result on the monetary policy expectations. Out of these, 37 percent expect a 100bps increase, 18 percent anticipate a 150bps increase and 19 percent are eyeing a 200bps hike, it added.
Out of the remaining participants, 2 percent expects more than 200bps increase, 5 percent anticipate a 50bps increase whereas 18 percent are eyeing no change and only 2 percent expect a rate cut. The SBP raised the policy rate by 100bps to 16 percent in November.
“We think that policy rate will increase by 100bps in upcoming monetary policy however if inflation rate does not fall and external issues persist, further rate hikes cannot be ruled out,” said an analyst at Topline Research.
Since the last monetary policy statement on November 25, the consumer price index (CPI) inflation increased to 24.5 percent in December from 23.8 percent in November. Urban core inflation (non-food non-energy) stood at 14.7 percent in December versus 14.6 percent in November. Rural Core Inflation increased to 19.0 percent in December, compared with 18.5 percent in the previous month.
Given supply side disruptions and increase in prices of certain food items during last few weeks, inflation in the near-term is expected to remain on the higher side, the poll said.
“The SBP expects average inflation of 21-23 percent in FY2023 whereas our inflation estimate is around 26 percent in FY2023,” the poll said.
On the external front, challenges continue to mount as foreign exchange reserves have dropped to $4.3 billion, down by $3.1 billion from November 25, barely an import cover of one month. This is due to huge debt repayments and the slowdown in foreign inflows, it added. In its last monetary policy statement, the SBP highlighted the concern of slowing foreign flows due to domestic political uncertainty and the tightening global situation amid rising global interest rates.
Pakistan's economy is currently in serious crisis as a result of fast declining foreign exchange reserves, a declining rupee, and worsening macroeconomic indicators. After a standoff with the International Monetary Fund over tax targets delayed loan payments from being disbursed, Pakistan's economy was severely cash-strapped. Floods that submerged a third of the country and reduced its growth by half made the situation worse.
China's President Xi Jinping applauds during the opening ceremony of the Forum on China-Africa Cooperation in...
This photograph shows the logo of US multinational technology conglomerate Meta, taken on May 22, 2022. —...
This is a representational image of a person holding gold chains. — AFP/FileKARACHI: Gold prices decreased by...
An employee working at a textile factory in Pakistan's port city of Karachi, on April 7, 2011. — AFPLAHORE: There is...
People shop at a crowded market ahead of Diwali, the Hindu festival of lights, in the old quarters of Delhi, India on...
Roblox Corp Chief Executive Officer and Co-Founder Dave Baszucki seen in this image. — X/@DavidBaszucki/FileRoblox...