SBP May Further Hike Interest Rate by up to 100 BPS

The State Bank of Pakistan (SBP) will likely raise the interest rate by up to 100 basis points (bps) in the upcoming Monetary Policy Committee (MPC) meeting scheduled for July 7 (Thursday).

The previously recorded highest interest rate was 14 percent, hence any upward revision will take the interest rate to a record high level.

Industry experts said that the banking regulator will tighten the monetary policy to control the supply-side shocks that carry responsibility for the current wave of inflation.

We believe the market has already factored in a 50-100 bps hike as the latest cutoffs of government securities especially 3M remained 100-150 bps above the policy rate, said Sana Tawfiq, a researcher at Arif Habib Limited.

A 50-100 bps hike in the interest rate would narrow down the gap between the commercial banks’ three-month cut-off yields and the central bank’s policy rate to near and around traditional levels.

Traditionally, the cut-off yields used to be higher by less than 100 basis points compared to the interest rate. The SBP has raised the interest rate from 6.75 percent in September 2021 to the present rate of 13.75 percent.

Source: Pro Pakistan