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Monetary policy: SBP likely to leave rate on hold today

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  • SBP to issue advance calendar of MPC meetings for first half of 2023.
  • Small section of market participants did not rule out a hike or reduction.
  • Central bank increased rate by 800 basis points in 11 months.

KARACHI: The State Bank of Pakistan (SBP) is scheduled to announce its key policy rate for the next six weeks today and a majority of pundits have developed a consensus that the central bank will leave the rate unchanged at 15% in order to wait for the stabilisation of the economy.

However, a small section of market participants did not rule out a hike of 50-100 basis points or a reduction of 25-50 basis points.

More importantly, Finance Minister Ishaq Dar, who is following his old recipe of running a controlled economy, will like to see an easy monetary policy. The policy rate is a tool for the central bank to create a balance between inflation and economic growth.

The central bank increased the rate by a cumulative 800 basis points in 11 months (September 2021 to July 2022) to 15%.

The Monetary Policy Committee (MPC) maintained the rate in its previous monetary policy unveiled on October 10, 2022.

Most of the pundits aren’t expecting any rate increase because the Ministry of Finance has not indicated anything in the recent T-bill auctions.

The OMO injection is growing and it’s around Rs6 trillion. And SBP has issued recent OMOs at prevailing rates. This implies that SBP might not be thinking of any increase in the rate. The secondary market yields imply the same.

In addition, another positive development since the last MPC meeting has been the decline in international prices of major commodities such as WTI, coal, brent, steel, wheat, and Arab Light. This bodes well for our external account position, hence providing much-needed relief to our trade numbers.

To recall, in the last monetary policy statement too, the MPC stated that the existing rate prudently reflected a balance between maintaining growth post floods and managing inflation.

Moreover, as mentioned in the last statement, SBP is closely monitoring the inflation trajectory. On the inflationary front, the headline inflation continues to remain in the double-digit since November 2021 mainly on the back of an uptick in food and energy prices.

In the month of October, headline inflation clocked in at 26.6% year-on-year. However, on a month-on-month basis, inflation increased by 4.71% mainly due to fuel cost adjustment adjustments and food price hikes.

The central bank is also expected to issue the advance calendar of MPC meetings for the first half of the calendar year 2023 after today’s meeting.

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The government is about to unleash another gasoline bomb on citizens beaten by inflation

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governmentThe price of petroleum products is anticipated to rise by the Federal Government starting on July 16. The price of gasoline is anticipated to rise by Rs7.67 per litre, the price of high-speed diesel by Rs3.72 per litre, and the price of kerosene by Rs2.73 per litre.

The people have informed me that a proposal to increase the petroleum levy has been created and is pending final clearance from Prime Minister Shehbaz Sharif.

After speaking with the premier, it is expected that the Ministry of Finance will declare the revised petroleum product prices tonight.

Petroleum product prices have recently surged due to rising global oil prices and Pakitsan’s adjustment of the petroleum levy in response to the International Monetary Fund’s (IMF) adamant demands, which forced the country to raise the petroleum development levy in the Finance Bill to Rs70 per litre.

Noteworthy is the fact that on July 1, the authorities also dropped a gasoline bomb.

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Positive Trend at PSX With a 1361-Point Gain for the KSE 100-Index

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In the first few hours of trading, the Pakistan Stock Exchange sees a bullish trend as the KSE 100-Index rises 1361 points, bringing the stock market to over 81,300 points.

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Significant surge in the price of gold in Pakistan

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On Friday, the price of gold in Pakistan continued to increase.

According to the All-Pakistan Gems and Jewellers Sarafa Association, the price of 24-karat gold per tola has risen by Rs2,200, reaching Rs249,000.

The price of 10-gram 24-karat gold increased by Rs1,886, reaching a total of Rs213,477. On Thursday, the cost of 10 grammes of 22-karat gold was Rs195,687.

The global gold market likewise had a rising trajectory. As per APGJSA, the worldwide rate was $2,404 per ounce, showing a decline of $24 during the course of the trading day.

The local market witnessed constant silver prices at Rs2,900 per tola.

Market observers attribute the increase in gold prices to other variables, such as volatility in the global market, currency exchange rates, and economic conditions. The ongoing surge in gold prices is likely to impact investment choices and consumer behaviour in the near future.

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