State Bank Governor Tariq Bajwa will chair the MPC meeting to be held at SBP head office Karachi. After the meeting, the governor will unveil Monetary Policy Decision at a press conference Friday. With lower inflation and rising economic activities, the committee in the previous policy, announced in November 2017, kept the policy rate unchanged at 5.75 percent.
Most of economists are expecting that the SBP will maintain status quo for next two months as inflation is well under the target. Although there is some pressure on external account however, SBP believes that it is still manageable, they added. CPI inflation on month-on-month basis has been recorded at -0.1 percent in December 2017 as compared to 0.4 percent in the previous month and -0.7 percent during corresponding month last year.
However, external account is under pressure due to lower foreign inflows and rising current account deficit. The country''s current balance posted a deficit of $7.413 billion in July-December of FY18 compared to $4.66 billion in the same period of last fiscal year, depicting an increase of 59 percent. Muhammad Suhail, CEO, Topline said most likely the policy rate will remain unchanged in upcoming policy as inflation remained on the lower side despite Pak rupee depreciation. However, he said the SBP may tighten the monetary policy in March as inflation is likely to pickup.
"We believe that the SBP will keep interest rate stable at 5.75 percent on Friday as inflation is below the target and not disturbing the ongoing growth momentum," said Samiullah Tariq, Director Research at Arif Habib Limited. The economic growth is already expected to be highest in a decade, he added. He said this is the election year and the government would like to show lower interest rate as an achievement in the upcoming elections. Khurram Schehzad of JS Global also expects that the SBP may keep discount rate at current level due to positive inflation outlook.