State Bank of Pakistan moves forward monetary policy meeting to March 2; rate hike imminent

Initially scheduled for March 16, market participants in a recent treasury bill auction are expecting at least a 200 basis points increase in the central bank’s policy rate.


March 1, 2023

ISLAMABAD – The State Bank of Pakistan (SBP) on Tuesday said it has called a meeting of its Monetary Policy Committee on March 2 — two weeks earlier than scheduled — when it is expected to raise the main policy rate.

“The forthcoming meeting of the Monetary Policy Committee has been preponed and now it will be held on Thursday, March 02, 2023,” the SBP said in a brief statement.


The next meeting of the central bank’s Monetary Policy Committee was initially scheduled for March 16. Off-cycle rate reviews are not uncommon though.

Pakistan is undertaking key measures to secure International Monetary Fund (IMF) funding, including raising taxes, removing blanket subsidies, and artificial curbs on the exchange rate. While the government expects a deal with the IMF soon, media reports say that the agency expects the policy rate to be increased as well.

Market participants in a recent treasury bill auction are expecting at least a 200 basis points increase in the policy rate, which stands at 17 per cent. The expected increase is based on the rates the government set in the auction to raise the funds.

The government raised Rs258 billion in the auction on February 22. The cut-off rates for the three-month, six-month, and 12-month tenors jumped 195 bps, 206 bps, and 184 bps higher than the previous auction.

The SBP has hiked rates by 725 bps since January 2022, with the last rise of 100 bps coming in January. At the time, the bank had said the move was aimed at tackling rampant inflation.

But shortly after that, annual inflation for January clocked in at a five-decade high of 27.5pc.

The recent hikes in gas tariffs and the general sales tax are yet to be incorporated, which is leading to expectations of the Consumer Price Index jumping close to 30pc in February.

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