An overwhelming majority of institutional market participants expect the State Bank of Pakistan to keep its benchmark policy rate unchanged at 11.5 percent during the upcoming Monetary Policy Committee meeting scheduled for July 27, 2026. According to the latest comprehensive survey conducted by Topline Securities, approximately 97 percent of surveyed financial institutions, treasury managers, and market analysts forecast a status quo decision, while a minor 3 percent minority anticipates a rate reduction of 100 basis points. The survey findings closely align with Topline Securities’ baseline macroeconomic projection, which anticipates that the central bank will maintain current borrowing costs in response to renewed geopolitical uncertainties and a rebound in global crude oil prices. Although domestic headline inflation has moderated considerably over recent quarters, external commodity price volatility and potential secondary price impacts continue to advocate for a cautious monetary stance. During its previous policy meeting on June 15, the central bank similarly held the key policy rate at 11.5 percent, a decision that coincided with a far more divided market consensus where only 49 percent of survey respondents had expected a rate pause.
Expectations for monetary easing had gathered substantial momentum following the signing of a diplomatic Memorandum of Understanding between the United States and Iran on June 18, which temporarily reduced regional geopolitical risk premiums and exerted downward pressure on international oil benchmarks. Following that development, financial markets aggressively began pricing in cumulative rate cuts ranging between 100 and 150 basis points across the subsequent two to three monetary policy cycles. However, the re-emergence of diplomatic friction over the past fortnight, combined with a quick recovery in international energy prices, has significantly curtailed expectations for immediate monetary stimulus during the July review.
Short-term secondary debt market instruments have actively reflected these changing monetary expectations. The yield on benchmark six-month Treasury bills initially dropped by 116 basis points, falling from 12.46 percent recorded on June 11 down to 11.30 percent by July 10. As global energy prices reversed direction and rate cut expectations receded, six-month T-bill yields adjusted upward by 20 basis points to settle at 11.50 percent. Concurrently, the six-month Karachi Interbank Offered Rate, a key benchmark for corporate credit pricing, was recorded at 11.67 percent. Looking toward the second half of the fiscal year, market projections regarding the policy outlook for December 2026 reflect a divided sentiment. Approximately 48.6 percent of survey respondents expect the central bank to maintain the policy rate at 11.5 percent through the end of the calendar year, while 45.7 percent foresee cumulative easing bringing the policy benchmark below current levels. A small subset of 5.7 percent foresees potential monetary tightening resulting in rate hikes above 11.5 percent. Topline Securities’ research desk projects that cumulative rate reductions will materialize before the end of December 2026 as headline inflation stabilizes within target ranges.
On the national inflation outlook, survey participants expressed varying forecasts for the fiscal year 2026-27 average. A plurality of 34.3 percent of respondents project average headline inflation to settle between 8 percent and 9 percent, while 31.4 percent expect average price growth between 9 percent and 10 percent. Another 28.6 percent forecast inflation falling into a lower band of 7 percent to 8 percent. Only 2.9 percent of participants expect inflation to drop between 6 percent and 7 percent, while 3 percent anticipate an average inflation rate exceeding 10 percent. Topline Securities expects average inflation to comfortably reside within the 7 percent to 8 percent range during FY27.
Currency market expectations gathered from the survey point toward continued stability for the local currency against the US dollar. Approximately 45.7 percent of market participants expect the exchange rate to trade within a narrow range of Rs280 to Rs285 per dollar by December 2026, while 31.4 percent project the parity to settle between Rs285 and Rs290. Meanwhile, 22.9 percent of respondents anticipate the rupee strengthening to between Rs275 and Rs280, with no survey participants forecasting a depreciation beyond Rs290 per dollar. Topline Securities maintains an exchange rate forecast in line with the consensus, projecting the rupee to remain anchored between Rs280 and Rs285.
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