Author Topic: Interest Rate Forecast  (Read 331754 times)

0 Members and 1 Guest are viewing this topic.

Offline Farzooq

  • Administrator
  • Senior Member
  • *****
  • Posts: 22033
  • Thanks Received: 196
    • View Profile
Re: Interest Rate Forecast
« Reply #1619 on: April 29, 2019, 09:48:06 PM »
CPI Likely to Settle at 8.96% YoY in Apr’19

Ramadhan Factor Accelerating Food Inflation

We expect Apr’19 inflation to settle at 8.96% YoY compared to 3.68% in Apr’18 and 9.41% in Mar’19, respectively. In particular, increase in CPI can be attributed to i) Uptick in prices of food related products, especially perishable items (Fresh Fruits and Vegetables) and Chicken, ii) Increase in price of MoGas by PKR 6.00/liter (increasing CPI by 16bps), iii) Drastic surge in prices of clothing material (Cotton Cloth and Lawn), and iv) Quarterly review of house rent index which is expected to increase by 2.00% QoQ (this will add 42bps in overall CPI) compared to last four quarterly review average increases of 1.99%. This will take 10MFY19 average inflation to 7.00%, compared to 3.77% in SPLY. On a yearly basis, increase in inflation is likely to be led by Transport (+16.8% YoY), Alcoholic Beverages & Tobacco (+12.1% YoY), Housing (+10.6% YoY), House Hold Equipment (+8.3% YoY), and Food (+7.8% YoY).

Monthly Inflation to grow by 1.42%

On a monthly basis, CPI reading is expected to increase by 1.42% MoM attributable to significant surge in prices of heavy weighted sectors, particularly the Transport Index (+3.60% MoM), Clothing and Footwear Index (2.53% MoM), Housing Index (+1.38% MoM), and Food Index (1.26% MoM). As per four weeks Sensitive Price Index (SPI) data published by the Pakistan Bureau of Statistics (PBS), average prices of Onions, Fresh Fruits, Chicken, Fresh Vegetable and Sugar are expected to register a surge of 29%, 10%, 8%, 7%, and 7% MoM, respectively.

Outlook

We expect inflation to continue its upward trajectory in upcoming months amid low base effect of last year. Ramadan factor may increase prices of perishable goods (fresh vegetables and fresh fruits), while lagged impact of adverse exchange rate movements and gradual increase in international oil prices may lead to higher prices of local petroleum products (MoGas and HSD). This may keep inflation in the range of 8.8%-9.3% for the remaining months of FY19, we view. However, increase in tariff of utilities (Gas and Electricity) is an upwards risk to our estimates.

 
TOP PICKS
Engro efert ogdc ppl pso dgkc luck hubc ubl hbl atrl nrl nml efoods aicl hcar searl

Pakinvestorsguide

Re: Interest Rate Forecast
« Reply #1619 on: April 29, 2019, 09:48:06 PM »

Offline Farzooq

  • Administrator
  • Senior Member
  • *****
  • Posts: 22033
  • Thanks Received: 196
    • View Profile
Re: Interest Rate Forecast
« Reply #1620 on: May 18, 2019, 12:11:27 PM »
Rate Hike of 100bps Likely in MPS

 Monetary Policy Statement Outlook

§ We expect another rate hike of 100bps in policy rate from 10.75% to 11.75% in the upcoming monetary policy which is expected to be announced on 20th May’19.

§ The aggressive monetary tightening is expected to continue by the central bank as it is going to be the seventh consecutive rate hike.

§ The monetary tightening is expected on the back of

i) rising inflationary pressure due to rise in prices of petroleum products and essential food items coupled with continuous slide of PKR leading to surge in prices of imported and local products (sold on import parity),

ii) mounting Fiscal Deficit despite sharp cut in PSDP and rationalization of tariffs and duties, and

iii) narrowing real interest rate as it declined to 1.66% in May’19 compared to last four year average of 2.75%.

§ We believe the State Bank of Pakistan is adopting a proactive stance to increase policy rate on account of higher inflation in upcoming months alongside attempting to curtail the current account deficit.

Real Interest Rate is Always on Higher Side in IMF Era

Since Oct’11, we have observed that during International Monetary Fund (IMF) period real interest rate (RIR) has always remained on the higher side at an average of 3.1% compared to an average of 2.2% in non-IMF period. This depicts that the IMF expects an increase in discount rate for sustainability despite lesser CPI during the period.

Money Market View on Monetary Policy

Furthermore, it seems like the money market has already incorporated the rate hike which is essential to fulfill the gap of 61bps between 12-M T-Bills (11.86%) and Discount Rate (11.25%).

Survey on Monetary Policy

§ We have conducted a short survey with institutional investors regarding their view on 1) interest rate in the upcoming Monetary Policy Statement (MPS) and 2) outlook on interest rates going forward.

§ Majority of the respondents (53%) are of the view that the interest rates are likely to see a 100 bps spike in the upcoming MPS. Only 12% of the respondents opined that the rates may see a 150 bps surge.

§ With regards to whether interest rates have peaked, 71% of the respondents are of the view that the rate hike era is yet to halt and will see further hikes going forward.

§ We asked the poll respondents about their 1-Yr forward view on the interest rate cycle. 48% of the respondents are of the view that interest rates will see a surge of 50-100 bps in the next one year. 29% of the respondents do not see any further rate hike following the upcoming MPS.

Inflation Outlook

We expect May’19 inflation to settle at 9.59% YoY compared to 4.19% in May’18 and 8.82% in Apr’19, respectively. We expect inflation to continue its upward trajectory in upcoming months amid low base effect of last year, sharp increase in prices of perishable goods (fresh vegetables and fresh fruits), lagged impact of adverse exchange rate movements and gradually increasing international oil prices which may result in higher prices of local petroleum products (MoGas and HSD). This may keep inflation in the range of 9.0-9.5% for the next four months, we view.
TOP PICKS
Engro efert ogdc ppl pso dgkc luck hubc ubl hbl atrl nrl nml efoods aicl hcar searl

Offline sAr

  • Active Member
  • ***
  • Posts: 613
  • Thanks Received: 6
  • All hail Value Investments
    • View Profile
Re: Interest Rate Forecast
« Reply #1621 on: May 20, 2019, 10:48:25 AM »
Quote
May-19 Inflation expected to touch 5-year High, 100 bps hike Likely owing to inflationary pressures arising from utility rate hikes, rupee devaluation, budgetary measures and lower real interest rate


Market expects that Monetary Policy Committee decision has potential to surprise on the upside (increase up to 200 bps)

https://themint.pk/monetary-policy-100bps-increase-likely/
Above mentioned comment is not a Buy/Sell recommendation. Do your own due diligence before Investing.

Offline tariqmeh

  • Junior Member
  • **
  • Posts: 304
  • Thanks Received: 2
    • View Profile
Re: Interest Rate Forecast
« Reply #1622 on: May 20, 2019, 04:07:47 PM »
150 points increased

Offline jaz

  • Junior Member
  • **
  • Posts: 388
  • Thanks Received: 4
    • View Profile
Re: Interest Rate Forecast
« Reply #1623 on: May 20, 2019, 04:59:28 PM »
Would SBP care to explain the rationale of this decision, other than stereo type statement.
1. Inflation is rising, yes. jacked up Interest rates help curb inflation by subdued demand, yes. But is it demand pull inflation or cost push. We all know it is cost push, so how do interest rates help? you keep devaluing currency prompting inflation and then try controlling it with policy rate. does it make sense?
2. It would restrict money supply as cost of borrowing goes up thus helps in reducing fiscal deficit. but biggest borrower is govt and not pte businesses and govt is not getting deterred because of interest rates, it would continue to borrow recklessly to meet current expenses. Instead it provides incentive to banks to lend money to govt.
3. If the entire effort is to subdue demand, there are other policy tools available to do that, enhanced cash margins, tariffs etc etc, why rely exclusively on on interest rates.
4. there is hardly any demand in mkt, if inflation still goes up courtesy further devaluation and govt spending, would SBP keep jacking policy rate?
5. Only positive i see is enhanced savings as it incentivizes fixed investments. But it would discourage productivity and job creation. Needless to say, stocks would take good hit.

Offline hirani

  • Junior Member
  • **
  • Posts: 122
  • Thanks Received: 2
    • View Profile
Re: Interest Rate Forecast
« Reply #1624 on: May 20, 2019, 07:31:53 PM »
Well inflation could hit 16% yoy projection, so what will be the interest rate than... Its just the party began, our economy going to be eroded like African nations, and soon business demand higher profit margins than interest rate, so further curtailment of business environment.

Offline Farzooq

  • Administrator
  • Senior Member
  • *****
  • Posts: 22033
  • Thanks Received: 196
    • View Profile
Re: Interest Rate Forecast
« Reply #1625 on: June 28, 2019, 01:13:55 PM »
CPI Expected at 9.32% YoY in Jun’19 | Policy Rate to Increase by 100bps

Continuous Surge in Food and Transport Index

We expect Jun’19 inflation to settle at 9.32% YoY compared to 5.21% in Jun’18 and 9.11% in May’19, respectively. The uptick in CPI will be owed to i) increase in price of MoGas by PKR 4.50/liter (augmenting CPI by 18bps), ii) surge in prices of clothing items on account of PKR depreciation, and iii) uptick in prices of food related products specially Wheat Flour, Potatoes, Fresh Vegetables, and Sugar. This will take the FY19 average inflation to 7.36% compared to 3.92% in SPLY. On a yearly basis, increase in inflation will likely be led by Transport (+17.0% YoY), Alcoholic Beverages & Tobacco (+14.0% YoY), Housing (+10.0% YoY), and Food (+8.6% YoY).
TOP PICKS
Engro efert ogdc ppl pso dgkc luck hubc ubl hbl atrl nrl nml efoods aicl hcar searl

Online ajeebkhan

  • Active Member
  • ***
  • Posts: 659
  • Thanks Received: 0
    • View Profile
Re: Interest Rate Forecast
« Reply #1626 on: June 28, 2019, 08:08:49 PM »
Monitory policy 1st July 2019 Monday ko due hai na I think.
Any update?
175 bps increase Kay chances?

Offline optimistic

  • Senior Member
  • *****
  • Posts: 5024
  • Thanks Received: 0
    • View Profile
Re: Interest Rate Forecast
« Reply #1627 on: June 28, 2019, 10:31:15 PM »
Monitory policy 1st July 2019 Monday ko due hai na I think.
Any update?
175 bps increase Kay chances?

This would be last week of July.
TOP Scripts as below: Updated (28th Sept, 2019)
1. Feroz, 2. Hinoon, 3. Akzo, 4. Mughal, 5. DCR, 6. APL, 7. CPPL, 8. Engro Corp, 9. Hubco, 10. Searl. 11. TRIPF. 12. Sanofi Aventis.

I am not perfect. Please do your own research my comments / or views may not prove accurate, nor i advise anyone to act upon on my recommendations, nor i accept any responsibility on me. Your money, your gain / or loss, before investing into any script better you gain sufficient knowledge of business and calculate risk accordingly as per your risk appetite.

Offline Farzooq

  • Administrator
  • Senior Member
  • *****
  • Posts: 22033
  • Thanks Received: 196
    • View Profile
Re: Interest Rate Forecast
« Reply #1628 on: July 13, 2019, 11:31:13 AM »
Monitory policy 1st July 2019 Monday ko due hai na I think.
Any update?
175 bps increase Kay chances?

This would be last week of July.

MPS 16th July
TOP PICKS
Engro efert ogdc ppl pso dgkc luck hubc ubl hbl atrl nrl nml efoods aicl hcar searl

Offline Observer

  • Junior Member
  • **
  • Posts: 152
  • Thanks Received: 0
    • View Profile
Re: Interest Rate Forecast
« Reply #1629 on: July 15, 2019, 11:54:01 AM »
Monitory policy 1st July 2019 Monday ko due hai na I think.
Any update?
175 bps increase Kay chances?

This would be last week of July.

MPS 16th July
What will happen as a result of further increase, aisai tu rhi sahi kasar bhe nekal jai gi.

Offline Farooq Qadir

  • Active Member
  • ***
  • Posts: 627
  • Thanks Received: 3
    • View Profile
Re: Interest Rate Forecast
« Reply #1630 on: July 15, 2019, 12:03:42 PM »

AKD Daily

Pakistan Economy: Monetary firepower remains relevant

•   The Monetary Policy Committee (MPC) of the SBP is scheduled to announce monetary policy tomorrow (Jul 16’19), where we expect it to raise the policy rate by another 100-150bps (policy rate of 13.25-13.75%) its 8th hike since Jan’18.
•   Ensuing the IMF’s Executive Board approval for the 3yr ~US$6bn EFF program, this upcoming monetary policy holds significant importance, as it will confirm the monetary elements of policy framework the SBP will follow.
•   Our rate hike expectation is premised on i) steep rise in inflation in 1QFY20 - though largely driven by adjustments in energy costs and taxation measures  – and ii) a need for more tight monetary policy to ensure macro-stability, particularly on the external side.
•   For the month of Jul’19, we expect headline inflation to rise sharply to 10.45%YoY vs. 8.89%YoY in the preceding month and 5.83%YoY in Jul’18.  This sharp increase in inflation primarily stems from i) utility rate hike (i.e. upward revision in gas tariffs) and ii) quarterly housing rent adjustment.
•   From the market’s vantage, investors are keenly awaiting the upcoming monetary policy decision (signified by drab volumes) and results season (including annual payouts) to re-position portfolios accordingly. We believe wider expectations of a 100bps rate hike are largely priced-in, where a surprise both on upside & downside could sway investor expectations accordingly.

POL, PSO,AICL,SEARL,NRL,FFC,FFBL,UBL,OGDC,MUGHAL

Offline aatradekhi

  • Senior Member
  • *****
  • Posts: 1772
  • Thanks Received: 0
    • View Profile
Re: Interest Rate Forecast
« Reply #1631 on: July 16, 2019, 05:04:50 PM »
State Bank raises benchmark interest rate to 13.25pc

The State Bank of Pakistan (SBP) raised its main policy rate by 100 basis points on Tuesday to 13.25 per cent, citing increased inflationary pressures and a likely near-term rise in prices from higher utility costs.

SBP Governor Reza Baqir said the decision to raise rates took into account upside inflationary pressures and the impact from recent increases in utility prices.

Based on these factors, the SBP revised its inflation projection for the ongoing fiscal year to 11-12pc, "A little higher than earlier estimates, due to which we have increased the policy rate."

"If you look at the time-path of this inflation, in the next few months, due to one-time factors, inflation will be higher. These have been accounted for [in our projections]. In the second half of the fiscal year, according to our projections, inflation will be lower. By the start of the next fiscal year, there will be a noticeable decrease in inflation," he said.

ARTICLE CONTINUES AFTER AD

The central bank has now increased its main policy rate nine times since the beginning of last year, raising it by a total of 750 basis points in a bid to control inflation, a widening fiscal deficit and pressure on the rupee.

Inflation eased slightly last month to 8.9pc but Baqir said he expected pressures to continue.

Under the bailout accord, the IMF said it expected “appropriately tight monetary policy” would bring inflation down to 5-7pc in the medium term.

With slowing growth, a budget deficit that has climbed to more than 7pc of gross domestic product and currency reserves of little more than $7 billion, Pakistan has been struggling to ward off a debt and balance of payments crisis for more than a year.

After initial reluctance, Prime Minister Imran Khan's government turned to the IMF for support and finalised a $6bn loan agreement this month that will unlock an additional $38bn in loans from other international partners.

The three-year agreement for Pakistan's 13th IMF bailout since the late 1980s has seen a sharp drop in the value of the rupee after the central bank agreed to a “flexible, market-determined exchange rate”.

The accord also foresees structural economic reforms and a widening of the tax base to boost Pakistan's chronically weak tax revenues.


Offline Farzooq

  • Administrator
  • Senior Member
  • *****
  • Posts: 22033
  • Thanks Received: 196
    • View Profile
Re: Interest Rate Forecast
« Reply #1632 on: July 31, 2019, 01:00:48 PM »
CPI Likely To Hit Seven-Year High at 11.23% YoY in Jul’19
TOP PICKS
Engro efert ogdc ppl pso dgkc luck hubc ubl hbl atrl nrl nml efoods aicl hcar searl

Offline HellBorne

  • New Member
  • *
  • Posts: 72
  • Thanks Received: 0
    • View Profile
Re: Interest Rate Forecast
« Reply #1633 on: July 31, 2019, 09:49:49 PM »


Source:
Contributor Composite Rates, Bloomberg Pro Terminal, extracted 7/31/19
Disclaimer:
** Don't trust me, I am a liar ** I share my views and analysis in personal capacity solely to meet like minded people.

Who am I?
A small investor, student, professional and curious person with dreams.

Offline Farooq Qadir

  • Active Member
  • ***
  • Posts: 627
  • Thanks Received: 3
    • View Profile
Re: Interest Rate Forecast
« Reply #1634 on: August 23, 2019, 03:22:35 PM »

AKD Daily

Pakistan Strategy: Yields signal a road less travelled for markets
? ?
 Following the results of the latest PIB auction (cut-off yields for 5yr/10yr bonds falling 25/40bps to 13.55/13.15%), we draw conclusions for monetary policy based on the inverted yield curve (yield spread between 3yr & 10yr widened to 110bps vs. 70bps in the July) significantly weakening the case for further tightening
? ?
 Making the case for an inversion being positive for domestic equities, we highlight major characteristics of Pakistan’s financial markets (thinly traded debt market limits predictive power of yields) that negate many of the widely held international trends based on this phenomenon (harbinger of recession), while flagging inflation reads for the months of 3QCY19 (and any additional revenue measures adopted along the way) to crystalize our rate cut forecast
? ?
 For Banks, longer tenor bonds, despite relatively stuffed spreads still offers appeal to Banks given, flat private sector offtakes, fresh lending yield of 50bps, and risk-free return on these investments where credit risks could surge in the ongoing macro environment (CY19/20F cost of provisioning: 0.7/0.8%).
? ?

 Contrasting macro, debt market (10yr PIB vs. DR spread) and equity market (forward P/E) metrics to ascertain the interactions between these variables, we highlight the largely inverse movements arising from yield inversion (long term maturity yields exceeding short term DR).
? ?

 While an overlay of consumption growth highlights a slow recovery scenario, based on splitting period returns and dissecting monthly market performance over the period of recovering spreads in the past, higher monthly gains, lends weight to additional period gains for market participants to leverage returns, on the bumpy road to macro recovery (influenced by policy, geopolitics). We adhere to our bias for hedged-income E&Ps (OGDC and PPL) followed by conviction calls on HBL, MCB and UBL accompanied by the growth tilt on offer in LUCK, HUBC and ENGRO.
POL, PSO,AICL,SEARL,NRL,FFC,FFBL,UBL,OGDC,MUGHAL

Offline Farzooq

  • Administrator
  • Senior Member
  • *****
  • Posts: 22033
  • Thanks Received: 196
    • View Profile
Re: Interest Rate Forecast
« Reply #1635 on: August 30, 2019, 12:48:16 PM »
CPI to Settle at 11.28% YoY in Aug’19 | Status Quo Expected at MPS

Transport and Housing Index takes Inflation at Jun’12 Levels

§  We expect Aug’19 inflation to settle at 11.28% YoY compared to 5.84% in Aug’18 and 10.34% in Jul’19, respectively. The uptick in CPI is expected on the back of i) increase in prices of perishable products including Tomatoes , Onions and Potatoes. Ban of trade with India resulted in price of Tomatoes surging by 23% MoM. Whereas hike in prices of petroleum products on account of higher international oil prices and surge in prices of clothing items amid PKR depreciation were also key culprits behind the uptick in CPI. On a yearly basis, increase in inflation will likely be led by Alcoholic Beverages & Tobacco (+35.8% YoY), Transport (+17.0% YoY), Miscellaneous (+13.3%) and Housing (+12.5% YoY).

Monthly Inflation to settle at 1.06%

§  On a MoM basis, CPI reading is expected to increase by 1.06% attributable to surge in Transport Index (+3.09% MoM), Food index (+1.69% MoM) and Clothing & Footwear Index (+1.93% MoM). As per four weeks Sensitive Price Index (SPI) data published by the Pakistan Bureau of Statistics (PBS), average prices of Onions, Tomatoes, Chicken, Potatoes, Eggs, and Fresh Vegetables are expected to register a jump of 27%, 23%, 19%, 12%, 6% and 6% MoM, respectively. On the other hand, meagre decline in prices of essential food items which are already trading at premium compared to imported prices like Wheat (-0.5%), Wheat Flour (-0.2%) and Fresh Fruits (-12% MoM) are expected to keep the food index contained.
TOP PICKS
Engro efert ogdc ppl pso dgkc luck hubc ubl hbl atrl nrl nml efoods aicl hcar searl

Offline Farzooq

  • Administrator
  • Senior Member
  • *****
  • Posts: 22033
  • Thanks Received: 196
    • View Profile
Re: Interest Rate Forecast
« Reply #1636 on: September 05, 2019, 03:35:21 PM »
Market may now be expecting rate cut:Secondary market yields have come down that may
be signaling expectations of rate cut. One-year T-Bill traded at 13.8% yesterday compared
to cut-off of 14.24% in the T-Bill auction on August 28. However, current level of interest
rates may sustain at these levels for next 12 months, we believe. Even though inflation
trajectory will likely be on decline after few months, significant foreign exchange build-up
will be the key for any chance of rate cut in the near future. Also, these carry trades may
result in status quo in interest rates for a prolonged time in order to provide ample returns
to investors.
TOP PICKS
Engro efert ogdc ppl pso dgkc luck hubc ubl hbl atrl nrl nml efoods aicl hcar searl

Offline Farzooq

  • Administrator
  • Senior Member
  • *****
  • Posts: 22033
  • Thanks Received: 196
    • View Profile
Re: Interest Rate Forecast
« Reply #1637 on: September 07, 2019, 11:54:42 AM »
Outlook on Inflation and Monetary Policy Statement
 ? After incorporating the new methodology, we expect inflation to remain elevated for the next six months with an average of 10.4% from Sep’19 to Feb’20 compared to our previous base assumption of 11.5% and is expected to peak out in Jan’20
. Thereafter, it will start declining.Albeit, the new base year lowers our inflation forecast by 110bps to average at
9.6% in FY20 compared to our previous expectation of 10.7%. As a result, this will increase the chances of a
rate cut in the upcoming monetary policy which is scheduled at end of this month
. We now expect the State Bank of Pakistan to cut the policy rate by 25bps to 13.0% compared to our previous
stance of status quo . We also expect a further 100 bps rate cut in FY20 which is expected in
Mar’20 and May’20 by 50bps each.
TOP PICKS
Engro efert ogdc ppl pso dgkc luck hubc ubl hbl atrl nrl nml efoods aicl hcar searl

Offline Farooq Qadir

  • Active Member
  • ***
  • Posts: 627
  • Thanks Received: 3
    • View Profile
Re: Interest Rate Forecast
« Reply #1638 on: September 07, 2019, 05:35:30 PM »
Outlook on Inflation and Monetary Policy Statement
 ? After incorporating the new methodology, we expect inflation to remain elevated for the next six months with an average of 10.4% from Sep’19 to Feb’20 compared to our previous base assumption of 11.5% and is expected to peak out in Jan’20
. Thereafter, it will start declining.Albeit, the new base year lowers our inflation forecast by 110bps to average at
9.6% in FY20 compared to our previous expectation of 10.7%. As a result, this will increase the chances of a
rate cut in the upcoming monetary policy which is scheduled at end of this month
. We now expect the State Bank of Pakistan to cut the policy rate by 25bps to 13.0% compared to our previous
stance of status quo . We also expect a further 100 bps rate cut in FY20 which is expected in
Mar’20 and May’20 by 50bps each.
:biggthumpup: :biggthumpup:
POL, PSO,AICL,SEARL,NRL,FFC,FFBL,UBL,OGDC,MUGHAL