The State Bank of Pakistan is currently at a monetary crossroads as it prepares for its upcoming policy meeting on Monday. According to a recent Reuters poll, a majority of analysts expect the central bank to hold its key policy rate at 10.5 percent, yet a growing faction of market experts warns that the first rate hike in nearly two years may be on the horizon. This potential hawkish shift comes in response to the geopolitical fallout from the Iran-US conflict, which continues to drive up global oil prices and elevate Pakistan’s import bill, complicating the central bank’s previous easing cycle.
The survey of ten leading analysts reveals a split in market expectations. Six participants forecast that the SBP will keep the status quo, while three predict a 50 basis point increase, and one analyst calls for a more aggressive 100 basis point hike. This represents a significant change in sentiment, as the central bank has been on a consistent easing path since June 2024. During that period, rates were slashed by a cumulative 1,150 basis points from a record peak of 22 percent, with the most recent reduction of 50 basis points occurring in January 2026.
The primary driver of this uncertainty is the sustained volatility in the global oil market. Despite a ceasefire in the Iran-US war, the absence of a lasting peace deal keeps energy markets on edge. For an oil-importing nation like Pakistan, these elevated prices exert direct pressure on the Consumer Price Index. Official data shows that inflation accelerated to 7.3 percent year-on-year in March, up from 7 percent in February. This move has pushed inflation slightly above the SBP’s medium-term target range of 5 to 7 percent, leading to concerns that the figures could approach double digits by the end of April.
Fawad Basir, head of research at KTrade, maintains the most hawkish outlook in the survey, projecting a 100 basis point hike. He suggests that elevated oil prices might force the Monetary Policy Committee to take a precautionary measure to anchor inflation expectations, even if it does not signal the start of a prolonged tightening cycle. This view is echoed by independent analyst Ammar Habib Khan, who advocates for a 50 basis point hike, noting that market yields in the secondary market have already begun to price in a move toward higher rates.
On the other side of the debate, the hold camp argues that the current inflationary spike is a supply-driven shock that may be temporary. Analysts at JS Capital estimate that the twelve-month average inflation will eventually settle around 7.5 percent, suggesting the central bank might choose to look through these near-term pressures to support economic growth. Sana Tawfik, head of research at Arif Habib Limited, points to the country’s strong external position as a reason for restraint. With a $1.07 billion current account surplus reported in March and a stable exchange rate, some believe that tightening policy now would risk undermining economic momentum without effectively curbing supply-side inflation.
The decision also carries weight regarding Pakistan’s ongoing $7 billion International Monetary Fund program. The IMF has consistently advised the SBP to maintain a positive real interest rate and has cautioned against premature easing that could destabilize the hard-won macroeconomic progress. As the SBP governors meet this Monday, the balance between supporting a fragile economic recovery and aggressive inflation targeting remains the central challenge. The outcome of this meeting will serve as a vital indicator for the direction of the national economy through the remainder of 2026.
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