SBP may cut 1% – 1.25% policy/discount rate in its MPC meeting on Tuesday
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KARACHI: The State Bank of Pakistan’s Monetary Policy Committee (MPC) will announce its new monetary policy for the next two months in which it may reduce the benchmark policy rate by 100 basis points.
According to the market analysts and brokerage houses, the Prime Minister and his cabinet ministers are indicating that there could be a good news in the new monetary policy scheduled to be announced on Tuesday, but the analysts forecast that the Central Bank will not reduce the policy rate exceeding to 100 basis points. The central bank may fix the new discount rate up to 12.25% to 12% for next two months from the current figure of 13.25 per cent.
The brokerage house expect the National Consumer Price Index (NCPI) to ease-off further during the month of March 2020, clocking-in at 10.4% year on year (up 0.2% month-on-month). NCPI expectation for fiscal year 2020 is 11.4 per cent.
In addition, money markets have commenced responding to the anticipated easing in the form of declining yields across both long-term and short-term government securities. Year to date cut-off yield on 3M T-Bills has declined 76 basis points. Elsewhere, yield on 3Y PIBs dropped 46 basis points in the latest auction.
Further, the analysts believe that the impetus for rate cuts is also likely to be strong amidst the ongoing global monetary easing drive-to arrest the economic slowdown from the Coronavirus.
Consequently, the analysts expect hot-money outflows to continue which may put the Rupee under pressure. As of March 13, 2020, the Rupee had lost 3 per cent of its value against the dollar since the start of 2020.
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