SBP’s next Monetary Policy Committee (MPC) meeting will be held on the 31st of July 2023.
To gauge the view on monetary policy outlook, Topline Research polled key market participants on expectations over policy rates and key macro estimates.
As per the survey, 48% of participant expects no change in the policy rate, while 46% of participant expect a 100bps increase in the policy rate. For the remaining 6% expect the policy rate to increase by more than 100bps.
In the IMF Country Report, Staff emphasised that the SBP will need to continue its tightening cycle to re-anchor expectations given that inflationary pressures are expected to persist over the coming year, including because the impact of exchange rate corrections will continue to reverberate through the economy.
In response to a question on when you think the interest rate will decline, 46% participants expect interest rate will decline from 3QFY24; 17% expect in 4QFY24 and 15% expect interest rates will not decline this fiscal year. Rest 13% of the participants expect interest rate to start decline from 2QFY24 and 10% expect interest rate to decline from 1QFY24.
In response to the question regarding the expected average inflation for FY24, 48% of the participants anticipate inflation to range between 20-24%. Among them, 25% of the participants expect inflation to fall between 20-22%, while 23% anticipate it to be between 22-24%. 19% of the participants anticipate inflation to be between 24-26%. On the other hand 25% participants expect inflation to be below 20% and 8% of participants expect inflation above 26%.
Pakistan’s CPI Inflation in Jun 2023 came down to 29.4% YoY vs. 38.0% YoY in May 2023 attributed to the high base effect from the last year along with lower food prices.
We anticipate monthly CPI inflation to soften further in upcoming months and gradually decline over the next 12 months because of base effect along with tight monetary and fiscal policy. Decline in Petrol and Diesel prices will also ease inflation in coming months, unless there is any major pressure on PKR and global oil prices.
Considering above factors, we also expect no change in upcoming MPC meeting. However, even if there were a 100bps change, it would not have a major impact due to the high base.
Courtesy- Topline Securities