The SBP policy rate is likely to remain unchanged at the State Bank of Pakistan’s policy review on Monday, according to a Reuters poll, as rising global energy prices and regional tensions complicate the inflation outlook.
All 10 analysts surveyed expect the central bank to keep the policy rate steady at 10.5%, following policymakers’ decision to hold the rate in January. The pause comes after aggressive easing since mid-2024.
Analysts say the main constraint is the risk of energy-driven inflation. Escalating Middle East tensions after US and Israeli attacks on Iran have raised concerns about shipping disruptions through the Strait of Hormuz, pushing oil and gas prices higher.
For Pakistan, that matters quickly. The country’s heavy reliance on imported fuel can raise the import bill, widen the trade deficit, and contribute to domestic inflation.
One analyst cited in the report said energy prices are likely to dictate the direction of interest rates, with inflation potentially averaging around 7% in the second half of FY26.
Analysts expect inflation to average 6%–8% in the coming months, but warn that higher oil prices could push it higher.
Another market expert cited in the report said higher oil prices can widen the trade deficit and increase pressure on the rupee. The same commentary noted that a $ 10-per-barrel rise in crude oil could add about 0.5% to inflation.
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Inflation was reported at 7% in February, up from 5.8% in January, highlighting the outlook’s continued sensitivity.
The SBP has said it aims to maintain a positive real interest rate to anchor inflation expectations under Pakistan’s $7 billion IMF programme.
While SBP targets 5%–7% inflation, analysts noted inflation may exceed that range for a few months if growth picks up and imports widen the trade deficit.
Governor Jameel Ahmad emphasised medium-term price stability and projected FY26 growth at 3.75%–4.75%, supported by stronger domestic demand and earlier monetary easing.
Overall, analysts say external risks, such as higher oil prices, rupee pressure, and trade deficit concerns, could delay any move toward further rate cuts.
