Discount rate hike expected

Hike may be inevitable when the State Bank of Pakistan (SBP) announces its monetary policy.

KARACHI: Further tightening of the discount rate may be inevitable when the State Bank of Pakistan (SBP) announces its monetary policy on September 29.

According to a report published by AKD Securities, the central bank may increase the policy rate by 50-100 basis points.

“With consumer price inflation clocking in above expectations at 13.23 per cent year-on-year in August and with inflation likely to pick up pace over the next few months, risks to monetary tightening have risen,” said AKD analyst Raza Jafri.

However, he argued that a further monetary tightening should be delayed considering the “significant risks to growth, declining core inflation and expected continuation of foreign aid.” The upcoming monetary policy statement will be the first of the tenure of recently-appointed SBP Governor Shahid Hafeez Kardar.

Published in The Express Tribune, September 21^st, 2010.