KARACHI: On the back of reversal in global commodity prices cycle, stable Pakistani Rupee/ US Dollar exchange rate and tamed inflation for fiscal year 2016-17 (FY17), the State Bank of Pakistan (SBP) is expected to continue its cautious monetary stance in today’s monetary policy announcement, economists said. The latest auction results revealed that yields remained flat and SBP sold Rs 28.5 billion worth of PIBs as opposed to target of Rs 50 billion with banks seeking higher yields and greater participation in short term bonds. The major considerations guiding the monetary policy committee’s decision would be controlled inflation and encouraging economic growth of the country as assessed by ADB and World Bank. However, caution is recommended as the economy is riddled with multifold challenges ahead which could prove to be damaging if the policy makers continue their myopic assessment and not implement remedial policies, said Naima Ali, Senior Economist. Inflation for March 2017 is expected to clock in at 4.76% YoY and 0.67% MoM taking cue from weekly SPI numbers. Inflationary pressure was expected to gradually materialize from this month chiefly due to increase in food prices. Subsequently, it is evident that the inflationary pressure is primarily due to rise in food prices which are expected to continue till Ramadan. However, CPI will not spiral out of hand and remain well below SBP’s target of 6% for FY17. Following the FED rate hike, global commodity prices have also started their downward trod, particularly- oil- which is expected to further decline due to US inventory pile-up. Unless oil prices do not display any surprising changes, imported inflation is also expected to remain at bay, she added. “We believe ‘status-quo’ position will be maintained in the upcoming monetary policy and foresee a delay in rate hike of 25-50bps by second half 2017. Having said that, this upsurge might further be delayed beyond second half of 2017 due to upcoming elections in 2018, SBP aims to provide monetary stimulus to the economy and export sector in the form of stable and easing monetary policy stance. The immediate threat is on the exchange rate to depreciate, in spite of foreign exchange reserves rising, debt is also piling”, said Ms Ali.