Karachi, January 21, 2022 (PPI-OT): Pakistan Economy: MPC meeting – expect Status Quo in policy rate

The Central Bank’s MPC (Monetary Policy Committee) meeting is scheduled for Jan 24, 2022, where we expect it to maintain Status Quo on policy rate at 9.75%, favouring to play a waiting game for clearer commodities trend particularly oil (+19.9% since the past one month), before diverging away from its stated guideline on interest rates.

Additionally, SBP could wait for recent budgetary measures to find footing and achieve desired objective of containing demand-side pressures, while recent COVID-wave and risks to envisaged economic growth target also move the balance towards holding interest rates in the upcoming MPC meeting.

Inflation for Jan’22 is expected to stand at 12.9%YoY vs. 12.3%YoY in the previous month whereas, on a monthly basis, it is likely to ascend by 0.35% compared to flat numbers in Dec’21. For FY22, we expect inflation to avg. at 10.7%YoY while for CY22, we forecast to avg. at 11.6%YoY compared to 9.5%YoY in CY21.

From stock market’s vantage, the upcoming MPC meeting is to be a non-event with market direction dependent on the formal resumption of the IMF program (IMF Board meeting on 28th Jan’22). With the expectation of IMF program going through, we advocate for building positions in Banks, Cements, Steel, and Construction-Allied.