Fall in benchmark’s cut-off yield Monetary policy likely to remain unchanged

By Muhammad Toori

KARACHI: The cut-off yield of the six-month treasury paper fell to 11.8970 per cent as compared to 12.0547 per cent on January 13 in an auction conducted here on Wednesday, the State Bank of Pakistan (SBP) said.
The decline in the benchmark's yield is making some analysts optimistic about the discount rate cut in the forthcoming monetary policy statement, which will be announced on Saturday, January 30.
Some other analysts are pessimistic on the inflation front.
"Decline in the benchmark T-bills gave a room to the central bank for further decline in the discount rate, but increase in inflation remains a concern, so I see 50 basis points decline or no change in the policy rate," said a banker.
On the other hand, Mozammil Aslam, an economist at the JS Global Securities, said, "I am sure that there will be a 50 to 100 basis points decline in the discount rate because it is a consecutive decline in six-month yield."
Mohammed Sohail, chief executive of Topline Securities, said, "I don't think that the discount rate will change because of the non-IMF inflows uncertainties and inflation which is now on the irse."
"We believe that the central bank needs a little more room and more time and while a rate adjustment is likely towards the second half of the fiscal year, it will only weaken the central bank's position with respect to inflation," said Khurram Shehzad, head of Invest Capital.
He said, "Economic indicators and our outlook suggest that while progress has been made on the inflationary front, inflationary pressures are likely to persist in the short-term.
On the positive side, inflationary adjustments such as subsidy elimination will no longer remain a factor. Oil prices at the current or lower levels within the next six months will also help on two key fronts: inflation and external account deficit."