SBP Will Not Adjust Monetary Policy in September: Survey

A majority of financial market participants believe that the State Bank of Pakistan will not adjust the monetary policy in September, as revealed in a survey conducted by Topline Securities.

The stockbroker had conducted a survey of 68 participants, of which 65 percent said that they do not expect the central bank to change its policy rate this month.

This compares to 89 percent of the participants who had not expected a change in the poll conducted in July.

In contrast, 25 percent had expected an increase of 25 basis points in the policy rate, while 10 percent had projected an increase of 50 basis points or above.

None of them anticipate a cut in the policy rate, Topline Securities added in its report.

Topline Securities predicts that the State Bank of Pakistan (SBP) will elevate its policy rate by 25 basis points in September. It expects the bank to do this in a bid to offset the vulnerabilities in the current account and the higher-than-expected sensitive price index (SPI) readings that indicate that there will be no reduction in the consumer price index (CPI) inflation as well as in anticipation of the start of the discussions with the International Monetary Fund (IMF) regarding program resumption.

The SBP had held the rate at seven percent in July to bolster economic recovery amid the pandemic. It is scheduled to convene its next monetary policy committee meeting on September 20.

Additionally, 54 percent of the participants expect an increase in the policy rate in 2021. Specifically, 44 percent of them expect the policy rate to rise by 50 basis points during 2021, while 10 percent estimate an increase of 100 basis points.

Regarding the exchange rate, 57 percent of survey participants presume that the Pakistani Rupee (PKR) will settle within the range of Rs. 165 — Rs. 170 against the US Dollar (USD), by the end of 2021. Meanwhile, 39 percent expect the PKR to be between Rs. 170 and Rs. 175 against the USD.

Yesterday, the PKR lost eight paisas against the USD to close at Rs. 168.10, nearing its all-time low of Rs. 168.4353 against the USD.



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