- The Consumer Price Index (CPI) inflation increased to 24.5 per cent in December 2022.
- The SBP expects average inflation of 21 to 23 per cent in FY23.
- Most of the participants anticipate it to range in between Rs240 to 260 by June 2023.
KARACHI: The State Bank of Pakistan (SBP) is likely to increase the policy rate up to 200 basis points to 18 per cent from the existing 16 per cent, a survey revealed on Saturday.
According to the survey conducted by the Topline Research, the majority of the participants, 74 per cent, expects the key policy rate to increase by 100 to 200bps. Of these, 37 per cent expects 100bps increase, 18 per cent anticipate 150bps increase and 19 per cent is eyeing 200bps rise.
Of the remaining participants, 2 per cent expects more than 200bps increase, 5 per cent anticipates 50bps increase, whereas 18 per cent eyeing no change and only 2 per cent expect a rate cut.
Since the last monetary policy statement on November 25, 2022, the Consumer Price Index (CPI) inflation increased to 24.5 per cent in December 2022, compared with 23.8 per cent in November 2022.
The urban core inflation (non-food non-energy) stood at 14.7 per cent in December 2022 as against 14.6 per cent in November 2022.
The rural core inflation increased to 19 per cent in December 2022, compared with 18.5 per cent in November 2022.
Given the supply side disruptions and an increase in the prices of certain food items during the last few weeks, inflation in the near-term is expected to remain on the higher side. The SBP expects average inflation of 21 to 23 per cent in FY23, whereas our inflation estimate is around 26 per cent in FY23.
On the external front, the challenges continue to mount, as the foreign exchange reserves dropped to $4.3 billion, down $3.1 billion from November 25, 2022 (since the last monetary policy statement), barely an import cover of one-month.
This is due to the huge debt repayments and a slowdown in the foreign inflows. In its last monetary policy statement, the SBP highlighted the concern of slowing foreign flows due to the domestic political uncertainty and tightening global situation, amid rising global interest rates.
The analysts at the Topline Research said the policy rate will increase by 100bps in the upcoming monetary policy. However, if the inflation rate does not fall and external issues persist, further rate hikes cannot be ruled out.
Regarding the rupee/dollar parity outlook in the interbank market by June 2023, most of the participants anticipate it to range in between Rs240 to 260 by June 2023.
Around 13 per cent expect it to be around Rs260 to Rs270, while 11 per cent expect it to be above Rs270. Besides, 11 per cent expect it to be in the range of Rs230 to Rs240, while only 3 per cent expect it to be around Rs220 to Rs230.
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