KARACHI – State Bank of Pakistan’s Monetary Policy Committee is meeting today to decide next course of monetary policy, and for now, the market is leaning heavily towards no change in the policy rate. The benchmark rate currently stands at 11.5%, and most analysts expect it to stay there.
But beneath the expected status quo is a bigger concern, rising oil prices and renewed geopolitical tensions could make the months ahead much harder for inflation.
The central bank has already kept its foot off the accelerator. At its previous meeting on July 27, MPC maintained the policy rate at 11.5%, saying the existing monetary stance was still suitable for steering inflation towards its medium-term target of 5% to 7%. Since then, Pakistan’s external position has shown signs of improvement.
Foreign exchange reserves have strengthened, the current account remains relatively contained and the country has successfully raised $3 billion through a Eurobond, giving the external account some additional breathing space. That is why analysts believe the SBP does not need to rush into another rate move today.
The numbers from a Karachi based brokerage house shows 84% of respondents expect the policy rate to remain unchanged at 11.5%. Still, the remaining responses show that a rate hike is firmly on the radar.
Around 14% expect the central bank to raise rates by 50 basis points, while 2% are expecting a 100-basis-point increase. In other words, the market is not expecting a surprise today, but it is keeping an eye on what happens next.
Higher global oil prices can quickly make life more difficult for Pakistan by increasing the cost of energy, transport and other essential goods. Analysts estimate that even with oil at around $95 per barrel, average FY27 inflation could remain below 9%. That would still leave the real interest-rate spread above 250 basis points, giving the SBP some room to maintain its current policy stance.
But if oil prices remain elevated for longer and food inflation also refuses to cool down, that cushion could start shrinking.
Market pundits expect SBP to maintain 11.5% today but has warned that energy prices and regional uncertainty could create renewed upside risks for inflation.
The upcoming MPC announcement in October or December 2026 could become important if oil and food prices continue to put pressure on inflation. Under such circumstances, the SBP could potentially raise the policy rate by 50 to 100 basis points.
