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SBP likely to tighten policy rate by 75bps today: Bloomberg

August 22, 2022 (MLN): The State Bank of Pakistan (SBP) is likely to tighten the policy rate by 75 bps to 15.75% today in an attempt to arrest surging inflation, as reported by Bloomberg.

The results of the latest auction of three-month treasury bills on Aug. 10 suggested the market is pricing in a hike of around 75 bps.

Inflation accelerated to 24.9% year on year in July from 21.3% in June. With the government having raised retail gasoline prices again on August 15, inflation is set to surpass the SBP’s forecast range of 18%-20% in fiscal 2023. We see inflation averaging 23% in fiscal 2023.

The government has said it will increase the fuel tax on gasoline to Rs50 per liter by January 2023 from Rs20. The government has committed to the IMF to lift the levy. This is likely to counter any benefits from falling global crude oil prices and might even push up inflation further.

After the expected hike in August, we see the central bank keeping its policy rate on hold through the end of this year.

Copyright Mettis Link News

Posted on:2022-08-22T09:49:28+05:00

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