Central bank to leave discount rate unchanged: economist
The next monetary policy statement is due to be announced on November 29 for the next two months.
KARACHI:
Given the regional monetary tightening, the question that arises is whether Pakistan will follow suit in the upcoming review or wait.
JS Global Capital economist Muzzammil Aslam believes that the central bank will prefer to wait and keep the policy rate intact this time around.
The next monetary policy statement is due to be announced on November 29 for the next two months. The State Bank of Pakistan reviews the key policy rate every two months.
The assessment came after a review of notes from the previous two monetary policy committee meetings and keeping in view the contraction of global monetary multiples, said Aslam.
A contrast between the meetings held on September 29 and July 29 was the voting pattern, wrote Aslam in a research report. Members in favour of a hike were in a ratio of 6:2 in September while a full consensus was seen in the July review.
In September, the members highlighted fiscal expansion as the key area of concern owing to higher expenses to be incurred on rehabilitation of flood victims. Additionally, members were concerned about uncertainty regarding the extent of flood losses and the government’s lacklustre efforts to avoid slacking in revenue collection.
In case of inflation, the monetary policy committee expected a temporary uptick due to the supply shock and that it was likely to revert back to the 12 per cent mark next year, said Aslam.
Changes since the last announcement
Keeping in view the remarks of the monetary policy committee, the analyst believes fiscal reforms are starting to take shape.
The government has already announced flood taxes which will take effect from 2011 and the most awaited RGST is due to be tabled in parliament soon.
Additionally against SBP’s expectations, the current account deficit is much controlled and came in at $533 million during July to October, down from $1.17 billion in the corresponding period last year.
Overnight rates during the month of November have been averaging around 12 to 12.5 per cent, which also depict improved liquidity in the system, said Aslam.
Hence, it is expected the central bank will weigh all the above factors and choose to keep the rates intact.
Published in The Express Tribune, November 25th, 2010.
Given the regional monetary tightening, the question that arises is whether Pakistan will follow suit in the upcoming review or wait.
JS Global Capital economist Muzzammil Aslam believes that the central bank will prefer to wait and keep the policy rate intact this time around.
The next monetary policy statement is due to be announced on November 29 for the next two months. The State Bank of Pakistan reviews the key policy rate every two months.
The assessment came after a review of notes from the previous two monetary policy committee meetings and keeping in view the contraction of global monetary multiples, said Aslam.
A contrast between the meetings held on September 29 and July 29 was the voting pattern, wrote Aslam in a research report. Members in favour of a hike were in a ratio of 6:2 in September while a full consensus was seen in the July review.
In September, the members highlighted fiscal expansion as the key area of concern owing to higher expenses to be incurred on rehabilitation of flood victims. Additionally, members were concerned about uncertainty regarding the extent of flood losses and the government’s lacklustre efforts to avoid slacking in revenue collection.
In case of inflation, the monetary policy committee expected a temporary uptick due to the supply shock and that it was likely to revert back to the 12 per cent mark next year, said Aslam.
Changes since the last announcement
Keeping in view the remarks of the monetary policy committee, the analyst believes fiscal reforms are starting to take shape.
The government has already announced flood taxes which will take effect from 2011 and the most awaited RGST is due to be tabled in parliament soon.
Additionally against SBP’s expectations, the current account deficit is much controlled and came in at $533 million during July to October, down from $1.17 billion in the corresponding period last year.
Overnight rates during the month of November have been averaging around 12 to 12.5 per cent, which also depict improved liquidity in the system, said Aslam.
Hence, it is expected the central bank will weigh all the above factors and choose to keep the rates intact.
Published in The Express Tribune, November 25th, 2010.