Summary
- Among those predicting a rate hike, a majority expected an increase of up to 50 basis points, while others believed the SBP could raise rates by 100 basis points.
- A separate survey by CFA Society Pakistan also reflected differing market expectations, with some participants forecasting no change and others anticipating a 50 to 100 basis point increase in the policy rate.
- Market indicators had suggested expectations of tighter monetary policy, with six-month Treasury bill yields and the Karachi Interbank Offered Rate (KIBOR) remaining above 12%, reflecting earlier concerns that the central bank might raise borrowing costs.
The State Bank of Pakistan (SBP) has decided to maintain its benchmark policy rate at 11.5%, citing a more favourable inflation outlook following a decline in global oil prices and easing geopolitical tensions after the reported agreement between the United States and Iran.
The decision was taken during the Monetary Policy Committee’s (MPC) meeting held on Monday, which marked the final monetary policy review of the fiscal year 2025-26 and the fourth policy assessment of the current calendar year.
The central bank had previously increased the key interest rate by 100 basis points during its April 27 meeting, ending a nearly three-year period without any rate hikes. At that time, the SBP had expressed concerns over the economic impact of escalating tensions in the Middle East, including rising energy costs, increased freight and insurance expenses, and disruptions to global supply chains.
However, the recent diplomatic breakthrough between the United States and Iran, which includes plans to end hostilities and restore normal shipping operations through the Strait of Hormuz, has reduced concerns about a fresh surge in international oil prices and inflationary pressures.
Prime Minister Shehbaz Sharif stated that the two countries are expected to sign a memorandum of understanding in Switzerland on June 19, with Pakistan playing a mediating role in efforts to achieve the agreement.
Before the policy announcement, financial experts had offered mixed expectations regarding the SBP’s decision. A survey conducted by Topline Securities showed that nearly half of the respondents anticipated the central bank would keep the rate unchanged, while an equal percentage expected a further increase.
Among those predicting a rate hike, a majority expected an increase of up to 50 basis points, while others believed the SBP could raise rates by 100 basis points.
A separate survey by CFA Society Pakistan also reflected differing market expectations, with some participants forecasting no change and others anticipating a 50 to 100 basis point increase in the policy rate.
Market indicators had suggested expectations of tighter monetary policy, with six-month Treasury bill yields and the Karachi Interbank Offered Rate (KIBOR) remaining above 12%, reflecting earlier concerns that the central bank might raise borrowing costs.
Pakistan had entered a monetary easing phase in June 2024, reducing the policy rate by a cumulative 1,150 basis points over several months. However, the April 2026 increase temporarily halted that trend as authorities responded to emerging external risks and inflation concerns.
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