The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) will meet on Monday to discuss monetary policy. The committee raised the benchmark policy rate by 125 basis points (bps) to 15pc during the latest monetary policy meeting in July 2022. Furthermore, it tied the interest rates of the Export Finance Scheme (EFS) and the Long-Term Financing Facility (LTFF) to the policy rate and gave a 500-basis point discount relative to the policy rate to encourage exports. The majority of economists anticipate that the future monetary policy, which will be unveiled on August 22, 2022, won’t change. They claimed that Pakistan’s trade deficit decreased by 18pc YoY and 47pc MoM during the month of July 22 mostly as a result of a decrease in import costs. This was a significant improvement in the economy recently. Analysts anticipate that the government’s efforts to limit imports and the drop in global commodity prices would result in a reduced current account deficit in FY23. This fiscal year’s current account deficit is anticipated to be under $9b. According to experts at Topline, “We believe that policy rate will stay stable in forthcoming monetary policy and are now close to its top where we can expect a fall in policy rates in the second half of FY23.” As Pakistan signed a staff level agreement with the IMF and the IMF’s board is anticipated to approve a tranche of $1.2b on August 29, 2022, they said that since the last monetary policy pronouncement, expectations of an improvement in the external account have grown. The Pak Rupee has also started to rally against the US dollar after reaching a low of Rs240; as of right now, it is trading at Rs214.65 per USD in the interbank market. They stated that these encouraging news flows have raised the likelihood that future monetary policy will remain unchanged. However, given that the benchmark CPI inflation spiked to a 14-year high at around 25pc in July, expect the State Bank of Pakistan’s (SBP) monetary policy committee (MPC) to raise the rate-probably by 100 basis points. This is because the weekly inflation hit a record high of over 42pc in the week that ended on Friday. As energy costs in the nation continue to rise, it is expected that inflation would continue to rise. The policy rate is a tool the central bank has to manage inflation. Furthermore, the central bank’s assertiveness in controlling excessive inflation through policy rate hikes cannot be overlooked. The bank raised the rate by 125 basis points to 15pc at its most recent meeting in July, despite the fact that a majority of economists expected a 100-basis-point hike and a minority of analysts expected the central bank to retain the status quo. The key policy rate, sometimes known as the benchmark interest rate, is still a tool that central banks throughout the world may use to strike a balance between inflation and economic growth. To alleviate economic problems, most of them (including the SBP) have kept the real interest rate (policy rate minus inflation) in negative territory since the start of the Covid-19 epidemic. Experts believe the rate will remain constant on Monday, blaming the uptick in inflation on an increase in energy prices designed to recoup the IMF loan programme. Pakistan appears to have fulfilled one of the two key goals of the increased policy rate. Imports have been reduced considerably by policy measures to $4.9b in July 2022, down from $7.7b in June 2022. The meeting would be presided over by SBP Deputy Governor Murtaza Syed, according to the central bank. Earlier, the government named Jameel Ahmed as the bank’s new governor for the next five years.