The Monetary Policy Committee of State Bank of Pakistan, under the chairmanship of Dr. Reza Baqir, will meet on Friday, January 22, 2021 to decide about Monetary Policy for the next two months. Governor SBP will hold a press conference to announce the Policy.
Analysts expect the status quo continuing with Discount Rate to be maintained at seven per cent. However, as the economy is gaining traction, Both fiscal and External economic figures are expected to deteriorate in 2021.
Firstly, Current Account position which was relecting surplus till November-2020 is expected to turn into deficit in December-2020 as increase in Imports outpace Exports Growth. Marginal increase in Current Account Deficit is expected in 2021.
Furthermore, the Inflationary Pressure is far from being over. Food Inflation has kept CPI elevated. Moreover, the upward revision in Petroleum prices and expected increase in Electricity Tariff will put more pressure on the inflation index. Any further upward movement of Crude Oil and Local food prices will exert additional price pressures on the economy. Analysts expect, Inflation for the period April-June 2021 to remain above 10 percent.
With Current Account in deficit and higher inflation level by June-2021, Economic conditions will be favouring Interest Rate Hike after June-2021.
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