Pakistan cbank expected to hold rates steady ahead of elections
By Ariba Shahid
KARACHI (Reuters) -Pakistan's central bank is widely expected to hold its key rate at 22% for the fifth policy meeting in a row on Monday, though an expected easing of inflation could leave the door open for rate cuts in the future, analysts said.
The decision is the last under a caretaker government before the country's general election next month. It also comes in the midst of Pakistan's $3 billion Standby Arrangement (SBA) with the International Monetary Fund (IMF).
While the rescue programme has helped avert a sovereign debt default, some of its conditions have complicated efforts to curb inflation.
Nine out of 10 analysts polled by Reuters predicted the State Bank of Pakistan (SBP) would keep interest rates unchanged on Monday, with one analyst predicting a 50 basis point (bps) cut.
«A rate cut is not justified. It will give the wrong signals to the IMF and show that Pakistan is not serious about controlling inflation,» said Ali Farid Khwaja, co-founder of KTrade.
Pakistan's key rate was raised to an all-time high of 22% in June.
Sami Tariq, head of research at Pak Kuwait Investment Company, expected the policy rate to be cut by 50 bps because real interest rates are positive on a forward looking basis.
Ahead of the IMF bailout, the latest tranche of which was approved on Jan. 11, Pakistan had to undertake a slew of measures, including revising its budget, hiking its benchmark interest rate, and increasing electricity and natural gas prices.
The policy rate was raised in an off-cycle meeting in June in a last-gasp attempt to secure funds from the IMF as part of a reform programme aimed at bringing stability to the troubled $350 billion economy.
Under the bailout deal, the IMF also required
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