EUR 8.55 For Business Accounts Only

Pakistan Central Bank sees Rate & Currency stability

• In line with street consensus, the State Bank of Pakistan (SBP) increased policy rate by 100bps, taking benchmark rate to 13.25%, depicting cumulative hike of 750bps since Jan 2018.
• Last two Monetary Policy Committee (MPC) meetings are being called earlier than usual. In previous policy SBP jacked up policy rate by 150bps which was seen as per prior action condition of getting IMF program. This time effort was to get maximum funds in today's T-bill auction, we believe.
• Recent hike of 100bps according to SBP is due to upside inflationary pressure from PKR weakening and one off impact of budgetary measures and utility prices.
• According to Bloomberg poll on MPS, 20 of the 39 economists casted their vote in favor of 100bps hike, four predicting 150bps and two 125bps. Remaining 13 economists were viewing 0-75bps.
• For the first time SBP in simple words have hinted that adjustments in interest rate have taken place. We think SBP is depending on softening demand coupled with assumption that consumer and investors confidence will improve despite ongoing political noise. Bond and Equity markets have reacted positively on this
• The SBP thinks that unanticipated increase in inflation will adversely affect inflation outlook may lead to further tightening. We believe, key risks to inflation would be increase in global oil prices and lower than anticipated tax collection.