KARACHI: State Bank of Pakistan (SBP) is scheduled to announce the monetary policy for November-December 2018 on November 30, 2018, wherein analysts are unanimously expecting 100bps hike in the key interest rates.
“We expect another rate hike of 100bps in discount rate from 9.00% to 10.00% in the upcoming monetary policy, this is going to be the fourth consecutive rate increase,” Arslan Hanif at Arif Habib Limited said.
Analysts believe the State Bank of Pakistan is adopting a pro-active stance to increase discount rate on account of higher inflation which is expected in upcoming months. Furthermore, it seems like the money market has already incorporated the rate hike that indicates discount rate hike is essential to fulfill the gap of 120bps between 12-M T-Bills (10.20%) and Discount Rate (9.00%).
In the last monetary policy meeting, State Bank of Pakistan revised its inflation target from 6.0-7.0% to 6.5-7.5% after considering various factors including upward revision in duties in the supplementary budget, potential pass through of exchange rate adjustment, volatility in food prices and cost pressure due to increase in gas tariff and international oil prices.