KARACHI: The meeting of the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) will be held on Friday, November 25, 2022 at SBP Karachi to take a decision on the key policy rate.

The MPC, in its previous meeting held on October 10, 2022, maintained the policy rate at 15 percent due to continued deceleration in economic activity, as well as, the decline in headline inflation and the current account deficit.

Like the previous stance, most of the analysts are expecting that the MPC may keep the policy rate unchanged at 15 percent in the upcoming monetary policy meeting.

There are some positive developments on the external account as the county’s current account deficit has declined some 47 percent to $2.82 billion during July-Oct of FY3 due to lower import bill supported by the government’s measures to contain the imports.

In addition, another positive development since the last MPC meeting has been the decline in international prices of major commodities such as WTI, Coal, Brent, Steel, Wheat and Arab Light. However, the inflation is still moving upward and foreign exchange reserves are declining.

CPI inflation increased to 26.6 percent in Oct 2022 as compared to 23 percent in Sep 2022 primarily due to major adjustment in electricity tariffs which will not be recurring. Furthermore, Oct 2022 imports saw 13 percent contraction as a result trade deficit was down by $2.7 billion to $20.6 billion during July-Oct of FY23.

In a survey conducted by Topline Research some 80 percent participants expect no change in policy rate in next monetary policy and the policy rate is likely to remain at 15 percent. Analysts think that current policy rate will remain unchanged in upcoming monetary policy and are now at its peak where a decline in policy rates is expected in the second half of FY23. Moreover, floods and monetary and fiscal tightening measures have led to slowdown in aggregate demand which could lead to SBP opting for status quo in the next meeting.

In the previous monetary policy statement, the MPC was of the view that the existing monetary policy stance strikes an appropriate balance between managing inflation and maintaining growth in the wake of the floods. Therefore, the SBP is expected to maintain the status quo in the next monetary policy to be announced on Friday.