KARACHI: In a recent poll conducted by Tresmark comprising over 25 bankers and brokers, 81.82% in the market unanimously agreed that SBP is likely to keep policy rate unchanged in its upcoming monetary policy this month.

A small faction (13.64%) however was of the view that SBP may further increase rates by 50 bps.
Common reasons cited favoring status quo by market observers are given below:
SBP accepted Rs. 46.92 billionn while maintaining cut off yields in its latest PIB auction on January 23, indicating no anticipated change. The accepted amount is substantially greater than the previous accepted amounts further indicating investor’s acceptance of this rate of return.

CPI has been on a downward trajectory and is expected to maintain this trend till May 2019 given low oil prices. A hike in the policy rate at this point might be premature as the market needs to fully absorb the impact of an earlier 1.5% hike in November.

A real interest rate of 4.5% is in line with historical return expectations of investor.
Market participants look forward to further tightening in the later policy announcements as most participation was averted from longer tenors (10 & 20 years) in PIB auction.

Any balance of payment or external financing pressure may result in rate hike sooner than later.