Discount Rate Kept unchanged at 12% – Alfalah Securities Limited

Karachi: The State Bank of Pakistan (SBP) has kept the rates unchanged in the monetary policy announced on 11th Feb 2012 very much in line with Alfalah Securities Limited’s expectations.

According to Alfalah Securities Limited, the decision is taken amid concerns of possible hike in inflation in the coming months, high government borrowing and deteriorating balance of payment situation which is exerting pressure on the PakRupee.

SBP expects the average inflation in FY12 to remain between 11 to 12%, arising from higher inflation in the 2HFY12. The higher inflation would be contributed by increases in electricity and gas prices, high international oil prices, impact of Pak Rupee depreciation, increase in support price for wheat, and substantial government borrowings from the banking system. The unchanged status of discount rate would not have much impact on the stock market as the situation remained stable. However, the no change in policy rate also gives signal of a possible hike in the rate going forward due to steeper currency devaluation, hike in inflation, declining forex reserves and rising current account deficit.