Topline Securities’ Poll Predicts 75-100 BPS Increase in New Monetary Policy

A poll by Topline Securities suggests that an increase of 75 bps or higher will be noted in the November 2021 Monetary Policy Statement (MPS). A total of 73 key financial market participants responded to the poll. For the coming MPS, 25 percent of the participants said that they expect an increase of more than 75 percent, while 30 percent said that they expect a rise of 75 bps. Also, zero percent of them expect no change at all. For the future expectations of the interest rate by the end of FY22, 11 percent hoped to see an increment of more than 150 bps, and 50 percent believe that the rise will be 150 bps. Additionally, 11 percent also said that they expect a rise of 100 bps only. The respondents were also asked about the future value of the Pakistani Rupee (PKR) against the US Dollar (USD) by the end of FY22, and 33 percent said that they expect to see the PKR/USD between 180-185. Another 33 percent felt that the PKR will stand between 175-180 against the USD. Besides them, 22 percent thought that the dollar will be below 175 by the end of the current fiscal year. The State Bank of Pakistan (SBP) has decided to hold a meeting of the Monetary Policy Committee (MPC) on 19 November instead of 26 November. The date has been rescheduled to counter the unexpected developments that have affected inflation, and to reduce the uncertainty about the monetary policy in the market. The central bank has already mentioned that the MPC expected the monetary policy to be accommodative in the near future and proposed “further tapering of stimulus to achieve mildly positive real interest rates over time”. Topline Securities suggested that the recent talks with the International Monetary Fund (IMF) will be influential to the current MPC meeting and will affect the policy as it is presumed that Pakistan will fulfill the demands prior to further plans with the IMF. The brokerage house in its report said that it looks forward to an increase of 75-100 bps in the policy rate from 7.25 percent, but a greater increase may be seen if the SBP tries to target a mildly positive real interest rate.