The State Bank of Pakistan prepares for its highly anticipated Monetary Policy Committee meeting this Monday, with a strong consensus among market analysts suggesting a pause in interest rate movements. Leading financial institutions expect the central bank to maintain the key policy rate at 10.5 percent, prioritizing economic discipline over reactive shifts. This sentiment comes at a time when the global landscape remains clouded by the fallout of the US-Iran conflict, which continues to exert pressure on international sentiment and energy markets.
According to a comprehensive report by Arif Habib Limited, the current global environment is too unsettled to justify a definitive change in policy. The brokerage house emphasizes that while oil prices remain a significant swing factor capable of moving markets, they have not yet established a stable enough trend to redefine the national inflation narrative. The analysts believe that at this juncture, the central bank must lean toward patience, allowing international peace negotiations and regional outcomes to take clearer shape before recalibrating the country’s monetary stance.
Domestically, the impact of external volatility is already filtering into local prices, though it has not yet destabilized the broader economic outlook. Transport inflation experienced a sharp burst of 12 percent month on month in March and is projected to reach approximately 15 percent in April. However, researchers note that the spillover into other sectors remains contained. There is currently no meaningful evidence of second round inflationary pressures building up, which provides the State Bank with some breathing room to maintain the status quo.
Looking toward the final quarter of fiscal year 2026, experts anticipate that the Consumer Price Index may move toward double digits. However, this expected spike is largely attributed to a base effect and energy price pass-throughs rather than demand side overheating. Arif Habib Limited maintains a base case scenario where inflation averages 7.1 percent for fiscal year 2026 and 8.5 percent for fiscal year 2027, with core inflation staying remarkably contained at around 8 percent. This suggests that the projected inflationary jump will likely be transient in nature.
The sentiment for a hold is further supported by industry surveys. Data shared by Arif Habib Limited indicates that 61 percent of participants expect no change in the rate, while 19 percent anticipate a 50 basis point hike. A smaller segment of 17 percent forecasts a 100 basis point increase, with only 3 percent expecting a 150 basis point jump. This collective outlook suggests that the majority of the financial sector believes a cautious approach is the most prudent path forward until the upcoming federal budget in June 2026 provides a clearer fiscal landscape.
Waqas Ghani, Head of Research at JS Global, echoes these expectations, noting that most financial institutions and high net worth clients are betting on zero change during Monday’s meeting. He points out that the unclear duration of the regional conflict continues to cloud the outlook, specifically regarding the long term inflationary impact of fluctuating energy prices. While a rate hike remains a technical possibility to pre-empt future risks, the prevailing view is that the central bank will opt for a period of observation.
As the Monetary Policy Committee prepares to convene, the focus remains on balancing the need for price stability with the necessity of supporting economic momentum. The upcoming decision is seen as a vital signal of how Pakistan intends to navigate the remainder of the fiscal year amidst external shocks. For market participants at the Pakistan Stock Exchange and across the industrial sector, a steady hand from the State Bank is expected to provide much needed predictability in an otherwise volatile global environment.
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