Market Expects SBP to Hold Policy Rate at 11.5% as MPC Meets

The State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC) is scheduled to meet today, with most market participants expecting the central bank to keep the policy rate unchanged at 11.5%.

 

At its previous meeting on July 27, the MPC maintained the benchmark rate at 11.5%, citing increased external risks following renewed geopolitical tensions in the Middle East. The committee had said the existing monetary policy stance remained appropriate to bring inflation towards its medium-term target range of 5-7%.

 

Analysts expect the SBP to maintain a cautious stance as higher global oil prices continue to pose risks to Pakistan’s inflation outlook.

 

Ismail Iqbal Securities expects the policy rate to remain unchanged, pointing to improving external buffers but renewed inflationary pressures. The brokerage noted that although average inflation is expected to remain in single digits, higher energy costs and regional uncertainty could create upside risks.

 

Market expectations also point strongly towards a status quo. A recent Topline Securities survey showed that 84% of respondents expect the policy rate to remain at 11.5%, while 14% anticipate a 50-basis-point increase and 2% expect a 100-basis-point hike.

 

Current oil prices of around $95 per barrel are expected to keep FY27 average inflation below 9%, providing a real interest rate spread of more than 250 basis points. Improving foreign exchange reserves and a contained current account position are also supporting expectations for no immediate change.

 

Topline Securities said the recent $3 billion Eurobond issuance has further improved the external outlook, strengthening the case for maintaining the current policy rate.

 

However, risks remain tilted towards tighter monetary policy if oil and food prices remain elevated. Analysts believe a 50-100bps rate increase could become more likely in October or December 2026 if inflationary pressures intensify.

 

JS Global also expects the MPC to hold the rate at 11.5% but warned that a prolonged escalation in geopolitical tensions could trigger a rate increase later in the year. The brokerage noted that around one-third of respondents in its recent survey expect a rate hike by December 2026.