State Bank of Pakistan is all set to announce its Bi-Monthly Monetary Policy on 27th of July’2021.

Majority of Financial Institutions anticipate status quo to prevail in the Monetary Policy with no rate change.

In its previous Monetary Policy announcement in May-2021, SBP kept the key interest rate stable at 7% citing accommodating Monetary stance in the near term while mentioning that any adjustments in the policy rate will be measured and gradual to achieve mildly positive real interest rates over time.

SBP has been following expansionary Monetary Policy since last year as it believes that broad-based economic rebound underway, on the back of targeted fiscal measures and aggressive monetary stimulus. This positive momentum is expected to persist, translating into higher growth next year. Hence, SBP’s expansionary monetary stance is expected to continue at least till 1HFY2022 (dec’2021).

In the May-2021 Monetary Policy, Out of Ten MPC Members, One voted for Rate increase by 100bps.

With inflation still at elevated level, Rising Current Account Deficit ($1.6bn in June alone) and depreciating Rupee (down 2.9% in July), Hawks are poised to tighten the grip sooner or later. However, rates are likely to remain stable till December-2021 as SBP supports Government’s Pro-Growth Stance. However, SBP may resort to tightening from Jan’2022 as risks starts emerging.

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