SBP is to be announed its decision regarding discount rate. The expectations in the market are that 50bps increase in discount rate is higly likely which will cause discount rate to reach 14%. The reason for this increase is high inflation (around 15%) and possible hike in inflaton after RGST, plus the amount of government borrowing is also not decreasing at all. However, some believe that SBP needs to understand that it can not control "CPI Inflation" consisted of consumer items simply by increasing discount rate. This is exactly what we have seen. SBP non-expansionary stance is not depressing inflation at all. If SBP has realized that then there is a chance that it might not increase rate. However the chances of this are very minimal.
POSSIBLE IMPACT ON MARKET:
The 50bps increase is expected in the market so if increase in discount rate is less than this then it would be positive for the market and in case of change of more than 50 bps market is expected to be negatively impacted.
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