Latest news with #MonetaryPolicyStatement
Business Recorder
3 days ago
- Business
- Business Recorder
Maintaining the policy rate
EDITORIAL: The Monetary Policy Committee (MPC) decided to keep the policy rate unchanged at 11 percent in spite of an increase in the Consumer Price Index (CPI) to 3.5 percent year-on-year in May 2025 (from 0.3 percent in April) — the highest since January 2024 when CPI was calculated at 2.4 percent — and more tellingly the Monetary Policy Statement (MPS) projected that 'some near term volatility in inflation is expected before it gradually inches up and stabilises within 5 to 7 percent.' The average CPI for the year 2024-25 was calculated by the Pakistan Bureau of Statistics (PBS) at 4.61 percent — lower than the projected increase next fiscal year. Core inflation declined to 7.3 percent last month (May), the lowest since May 2024. But in April 2025 core inflation was 0.1 percent higher than in May — at 7.4 percent — that may have been the basis for the MPS to refer to 'persistence in core inflation' though this so-called persistence was not evident in data from January to March 2025: 7.8 percent in January, 7.8 percent in February and 8.2 percent in March. The MPS noted that real interest rate remains adequately positive to stabilise inflation; however, if CPI had been used as a yardstick to adjust the discount rate (as it was during 2019 to 2022) then it should have been raised by 25 to 50 basis points and if core inflation was used as a yardstick then it could have been reduced by 25 basis points. This lends credence to the widely-held belief that the International Monetary Fund (IMF) did not approve any adjustment in the policy rate at this time — a decision that is inexplicable, given that the MPC met on 16 June (Monday) while a hike in domestic prices of oil and products was announced a day earlier (effective Monday) due to the rise in the international oil prices as a consequence of the ongoing Israel-Iran conflict and yet the MPS reads 'energy prices continued to remain lower than last year, mainly reflecting the impact of moderation in global oil prices' — an observation that does not justify the policy rate remaining unchanged from 16 June onwards. The influence of the IMF on the MPS is evident from its contention that 'economic growth is picking up gradually and is projected to gain further traction next year, supported by the still unfolding impact of earlier policy rate cuts,' which mirrors the IMF statement in the first review documents uploaded a month ago notably, 'the MPC's decision to hold the policy rate in their March 10 meeting was appropriate, allowing time for past rate cuts to feed through to the economy.' This growth of 2.7 percent in the outgoing year belies two macroeconomic indicators: (i) the negativity suffered by the large-scale manufacturing sector rose from negative 0.22 percent July-March 2023-24 to negative 1.47 percent in the corresponding period 2024-25 as per data uploaded by the Finance Division; and (ii) agriculture crops underperformed; however, PBS upped the livestock growth which faces challenges in terms of collecting accurate data (comprising a little over 14 percent of agriculture's total 24 percent contribution to GDP) and services again not credibly accounted for, given that it constitutes mainly wholesale and retail trade which mainly operates outside the legal economy. The MPS further notes that growth accelerated to 3.9 percent during the second half of 2024-25 compared to 1.4 percent in the first half, which was as per MPC expectations. However, there is little evidence of this growth spurt in the second half of this year. Keeping the policy rate unchanged may have repercussions on yet to be approved by parliament budget 2025-26, given that the 738.677 billion-rupee lower mark-up budgeted for next fiscal year from the revised estimates of the outgoing year (in spite of a massive rise in bank borrowing to the tune of 3.438 trillion rupees) may adversely impact the budget balance sheet. The MPS rightly noted two major positive macroeconomic outcomes: the completion of the first IMF review which led to a disbursement of one billion dollars that strengthened foreign exchange reserves (which remain largely sourced to debt); and primary surplus of 2.2 percent of GDP in the current year (a Fund condition that has led to an increased reliance on incurring debt/debt equity) budgeted at 2.4 percent in 2025-26, which will have to be reassessed if the discount rate is not lowered during the year though here the MPS has noted that this would reflect 'the evolving geopolitical situation in the Middle East and some ease in the US-China trade relations.' The SBP is tasked by the IMF to achieve what the Fund has noted in the first review: 'changes to central bank communication, particularly greater clarity on the MPC's assessment of the current and desired policy stance, have been welcome and should continue to help the public better understand the MPC's reaction function to incoming data, and guide expectations between meetings'. This can only be described as work in progress at this point in time. Copyright Business Recorder, 2025
Express Tribune
5 days ago
- Business
- Express Tribune
PSX range bound ahead of monetary policy
The Pakistan Stock Exchange (PSX) on Monday remained range bound and registered thin gains of 82 points as investors treaded cautiously ahead of monetary policy announcement later in the day. As expected by many analysts in the wake of escalating geopolitical tensions, the central bank left its policy rate unchanged at 11%. Despite the conflict between Israel and Iran, the market ended trading in the positive territory as it took cue from the recovery in global equities. In the morning, the PSX kicked off proceedings on an upbeat note and immediately reached its intra-day high at 122,903 points. Soon afterwards, investors resorted to profit-taking, pulling the KSE-100 index down to the intra-day low at 121,890 after midday. "Stocks advanced despite geopolitical risks amid speculation about the State Bank of Pakistan's (SBP) policy announcement later in the day," said Ahsan Mehanti of Arif Habib Corp. "Trade remained high amid consolidation. Recovery in global equities, IMF-driven upbeat projections for privatisation, economic growth and development expenditure in the federal budget for FY26 played the role of catalysts in positive close at the PSX." At the end of trading, the benchmark KSE-100 index recorded a slight rise of 81.79 points, or 0.07%, and settled at 122,225.36. Topline Securities, in its review, remarked that Pakistan's stock market experienced a pullback session, following recovery in global markets. The benchmark index traded within a range, hitting the intra-day high of 759 points and low of 253 points, before settling at 122,225 with a modest gain of 81 points. Topline mentioned that positive contribution to the index came from Bank AL Habib, OGDC, NBP, Mari Petroleum and Meezan Bank, which collectively added 371 points. On the other hand, stock selling in Engro Holdings, Pakgen Power and Lucky Cement wiped off 255 points. Market participation was robust as total traded volumes reached 1.22 billion shares and the traded value hit Rs26 billion, it added. Arif Habib Limited Deputy Head of Trading Ali Najib called it "a consolidation day ahead of the MPS (Monetary Policy Statement)." He said that the PSX had a range-bound session and ended on a relatively flat note at 122,225, up 82 points. The State Bank maintained its benchmark rate at 11%, as anticipated by the street. During the day, the benchmark index floated between 121,890 and 122,903 levels, making them the intra-day low and high, respectively. Investors opted for a cautious approach amid heightening geopolitical tensions in the backdrop of Iran-Israel conflict, Najib said. Among corporate news, the Fauji Fertiliser Company (FFC, -0.26%) board approved the submission of an Expression of Interest for PIA Holding Company (+7.95%) as the government planned to sell a 51-100% stake in PIA by the deadline of June 19. "Market direction hinges on Middle East developments and 120,000 serves as a key support. With improved stability, the index could target 130,000 in the near term," he anticipated. JS Research analyst Mubashir Anis Naviwala said that the bourse opened on a positive note, touching the intra-day high of 122,903, but failed to sustain the momentum. It closed at 122,225 as profit-taking emerged later in the session. On the economic front, the State Bank kept the policy rate unchanged at 11%, aligning with expectations. Trading activity was dominated by small-cap stocks, reflecting short-term speculative interest, he said. "We advise investors to maintain a cautious stance and avoid aggressive exposure for now. Risk management remains the key amid geopolitical uncertainty and macro developments," Naviwala added. Overall trading volumes stood at 1.22 billion shares compared with Friday's tally of 968.3 million. The value of shares traded was Rs25.7 billion. Shares of 471 companies were traded, of which 282 stocks closed higher, 159 dropped and 30 remained unchanged. Among volume leaders, WorldCall Telecom saw trading in 267.1 million shares, gaining 17 paisa to Rs1.62 per share. It was followed by Pervez Ahmed Consultancy with trading in 92.03 million shares, gaining one rupee to Rs3.93 and First Capital Securities with 86.02 million shares, higher by 79 paisa to Rs3.85. Foreign investors bought shares worth Rs243.5 million, the National Clearing Company reported.
Business Recorder
6 days ago
- Business
- Business Recorder
0.28pc decline
KARACHI: Rupee weakened during the previous week as it depreciated Re0.79 or 0.28% against the US dollar. The local unit closed at 282.96, against 282.17 it had closed the week earlier against the greenback, according to the State Bank of Pakistan (SBP). Finance Minister Muhammad Aurangzeb announced Pakistan's federal budget 2025-26 'for a competitive economy', targeting a modest 4.2% growth for the coming fiscal year, compared to 2.7% expected in the outgoing FY25. Meanwhile, the inflow of overseas workers' remittances into Pakistan stood at $3.7 billion in May 2025, SBP data showed. Remittances increased by 13.7% year over year, compared to $3.24 billion recorded in the same month last year. Foreign exchange reserves held by the SBP increased by $167 million on a weekly basis, clocking in at $11.68 billion as of June 6. Total liquid foreign reserves held by the country stood at $16.88 billion. Net foreign reserves held by commercial banks stood at $5.12 billion. The Monetary Policy Committee (MPC) of SBP will meet on Monday (today) to decide on the policy rate. The SBP said it would issue the Monetary Policy Statement through a press release on the same day. Open-market rates In the open market, the PKR lost 98 paise for buying and 72 paise for selling against USD, closing at 283.32 and 285.12, respectively. Against Euro, the PKR lost 3.92 rupees for buying and 3.90 rupees for selling, closing at 324.87 and 328.57, respectively. Against UAE Dirham, the PKR lost 31 paise for buying and 27 paise for selling, closing at 76.95 and 77.72, respectively. Against Saudi Riyal, the PKR lost 41 paise for buying and 32 paise for selling, closing at 75.21 and 75.93, respectively. ========================================= THE RUPEE ========================================= Weekly inter-bank market rates for dollar ========================================= Bid Close Rs. 282.96 Offer Close Rs. 283.16 Bid Open Rs. 282.17 Offer Open Rs. 282.37 ========================================= Weekly open-market rates for dollar ========================================= Bid Close Rs. 283.32 Offer Close Rs. 285.12 Bid Open Rs. 282.34 Offer Open Rs. 284.40 ========================================= Copyright Business Recorder, 2025
Business Recorder
13-06-2025
- Business
- Business Recorder
Status quo likely as rising oil prices play on SBP's mind, say analysts
The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) is expected to hold the key policy rate at 11% in its upcoming meeting scheduled for Monday, market analysts noted. 'While domestic macroeconomic indicators have improved significantly, particularly inflation and the external account, we believe, the central bank is likely to adopt a wait-and-see approach in light of emerging global risks and domestic policy adjustments,' Arif Habib Limited (AHL) said in its report. The MPC of the central bank will meet on June 16 to decide on the policy rate, the central bank announced on Thursday. The SBP said it will issue the Monetary Policy Statement through a press release on the same day. In its last meeting held on May 5, 2025, the MPC cut the policy rate by 100 basis points (bps) to 11%. This was the lowest policy rate since March 2022 (9.75%). The central bank has cut the rate by 1,100bps since June from an all-time high of 22%. At the time, the MPC noted that inflation declined sharply during March and April, mainly due to a reduction in administered electricity prices and a continued downtrend in food inflation. AHL, in its report released on Friday, was of the view that while the domestic landscape supports an easing bias, recent geopolitical developments have raised the stakes. 'Escalating tensions in key oil-producing regions have triggered a sharp surge in global oil prices. Benchmark crude contracts, including Brent, WTI, and Arab Light, have risen close to 10-12% WoW, with daily spikes exceeding 6% as of the latest reading. 'For an oil-importing economy like Pakistan, this poses direct and indirect inflationary risks,' AHL noted. The brokerage house, citing its estimates, said that for every USD 5/bbl increase in global oil prices (on an annualised basis) adds roughly 23bps to headline inflation directly. 'Additionally, any upward revision in domestic energy tariffs, though necessary to prevent further accumulation of circular debt, would carry inflationary implications. The timing and magnitude of these adjustments, alongside changes in food prices, and potential global trade disruptions, could alter the inflation outlook materially,' it shared. Topline Securities, another brokerage house, also expects the status quo as international crude oil prices have rebounded to US$68-70/barrel amidst rising tensions in the Middle East region and an expected US-China deal. 'This warrants a cautious approach from policy makers, in our view, as oil prices' movement has remained a major driver of inflation in past. 'Some of the major notifications are also expected before the start of next fiscal year i.e. gas price notification, and electricity price notification, among others,' Topline said in its report. The brokerage house shared that in its poll, 56% of the market participants expect a status quo in the upcoming monetary policy meeting compared to 31% in the last poll. While 44% are expecting a rate cut of at least 50bps. Out of the total 44% rate cut participants, 19% are expecting a 50bps cut, and 25% are expecting a 100bps cut, it added.
The Star
12-06-2025
- Business
- The Star
Closed-door RBNZ talk raises transparency concerns
WELLINGTON: An external member of the Reserve Bank of New Zealand's (RBNZ) Monetary Policy Committee (MPC) will be giving a rare presentation, but it will be behind closed doors. Prasanna Gai will speak at the Auckland Business Chamber on the topic of 'Monetary Policy and Trade Uncertainty.' It is an 'exclusive lunch gathering' where Gai will 'share his expert insights on interest rates,' according to the chamber's website. There will be a question-and-answer session after his speech, an RBNZ spokesman said. However, the event is closed to the media, will not be live-streamed and no speech notes will be published. 'There is no obligation for presentations by MPC members to be public or open to the media. That is up to MPC members to decide,' the spokesman said. Gai's remarks will be based on the May Monetary Policy Statement, 'so will not include any new information,' he said. Gai declined Bloomberg's request for an interview. His presentation follows a split on the MPC over whether to cut interest rates at the May 28 meeting, with one unidentified member voting to hold the Official Cash Rate (OCR) at 3.5% and the remaining five electing to lower it to 3.25%. The dissenting vote was one of the factors that prompted financial markets to reduce bets on the OCR falling below 3% this year. 'On one hand it's quite encouraging to have an external member of the MPC speaking,' said Brad Olsen, chief executive and principal economist at consultancy Infometrics. 'But having an external speak to a closed audience that not everyone can go to and there aren't any speech notes, you do start to worry a little bit. 'What sort of information is going to be highlighted there that might be said off the cuff, spur of the moment, that gives you a bit more insight into what's coming next?' Fund manager Simplicity chief economist Shamubeel Eaqub has sympathy for RBNZ policymakers speaking at private events because unfiltered access builds trust in the institution, but he thinks live-streaming the speech or publishing a recording afterwards would aid transparency. 'This whole limiting access thing is a problem,' he said. — Bloomberg
