SBP’s next Monetary Policy Committee (MPC) meeting will be held on the 4th of April, 2023.

In order to gauge the view on monetary policy outlook, Topline Research polled key market participants on expectations over policy rate and key macro estimates.

As per the survey, majority of the participants (92.5%) expects policy rate to increase by atleast 100bps. Out of these, 63% participants expect a 200bps increase, and 5% participants expect a 300bps increase. 8% participants expect no change in policy rate.

In response to the question on IMFs 9th review, 15% participants do not expect a staff level agreement to happen with the IMF. Only 16% participants expect a staff level agreement (SLA) within the next 2 weeks while 31% participants expect agreement in 2-4 weeks and 37% participants expect an agreement with the IMF after 4 weeks.

Responding to question on where do you see Policy Rate in 12 months (March 2024), 8% of the participants anticipate policy rate to be above 22%. 19% participants expect policy rate to be between 20-22% while 25% expect policy rate to be between 18-22%. On the other hand 48% participants expect policy rate to be below 18% of which 18% participants expect policy rate below 16%.

CPI has also increased by 31.5% YoY in Feb 2023 as compared to 27.6% in Jan 2023. Urban core inflation (Non Food Non Energy) stood at 17.1% in Feb 2023 vs. 15.4% in Jan 2022. Rural Core Inflation increased to 21.5% in Feb 2023 vs 19.4% in Jan 2023. Mar 2023 CPI is likely to show an YoY increase of more than 34%, we estimate.

Considering above factors, we also expect 100-200bps increase in upcoming MPC meeting considering higher than expected inflation and rupee devaluation against US dollar where we see CPI inflation in FY23 to average at around 28%. SBP in its MPC on March 02, 2023 also expected average inflation for FY23 to be in a range of 27-29%.

Courtesy – Topline Securities