Key policy rate may be kept unchanged


KARACHI: The State Bank of Pakistan (SBP) will unveil the Monetary Policy Statement on Friday (Mar 19).

The SBP’s Monetary Policy Committee (MPC) is scheduled to meet on March 19 to decide about the monetary policy. Later on, the SBP will issue the MPS to announce the decision of the committee for key policy rate.

While, announcing the previous monetary policy in January, the MPC maintained the policy rate at 7 percent and hinted that monetary policy settings will remain unchanged in near term.

During the previous MPC meeting, for the first time, the committee decided to provide some forward guidance on monetary policy to facilitate the policymakers for making policies and to give confidence to investors. “The interest rate will remain intact in near future and any increase in future, if needed, will be in phase-wise manner,” announced SBP Governor Dr. Reza Baqir hinted in the previous monetary policy briefing.

Most of analysts are also expecting the monetary policy committee of the SBP will keep the policy rate unchanged at 7 percent for next two months.

Analysts at Topline Securities are expecting no change in the Policy Rate in the March 2021 MPS, however, policy rate may increase by 100 basis points (bps) in 2021.

They said that changes in views towards increase in Policy Rate going forward 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 including sugar, scrap, palm oil etc.

Analysts at AHL Research also expecting that the SBP to keep policy rate unchanged at 7 percent in the upcoming monetary policy. The committee in its last meeting in Jan 2021 also hinted at a very gradual and measured monetary tightening stance when the need arises, they added.

Taurus Securities’ forecast is “No Change to 25bps hike” in the benchmark policy rate, based on inflationary pressures and resumption of the IMF program.

Since June 2020, the committee has kept the policy rate unchanged at 7 percent to support the economy, which was badly hurt due to Covid-19 pandemic and recorded negative 0.4 percent GDP growth in FY20.