SBP MPC Meeting Outlook Shifts Toward Rate Hike

The State Bank of Pakistan (SBP) is scheduled to convene its third Monetary Policy Committee (MPC) meeting of calendar year 2026 on April 27 to determine the benchmark policy rate, amid evolving domestic macroeconomic indicators and external sector pressures.

Recent market sentiment reflects a shift toward the likelihood of monetary tightening. A survey conducted by Topline Securities indicates a divided outlook among participants, with a majority now anticipating an upward adjustment in the policy rate.

According to the survey findings, 53% of respondents expect an increase in the policy rate. Within this cohort, 41.2% project a hike in the range of 50 to 100 basis points, 10% anticipate a more moderate increase of 25 to 50 basis points, and 2% foresee a more substantial adjustment exceeding 100 basis points.

Conversely, 43% of respondents expect the policy rate to remain unchanged, while a marginal 4% anticipate a potential reduction of 50 to 100 basis points.

This shift in expectations marks a significant departure from March 2026 sentiment, when approximately 92% of participants projected no change in the policy rate. Analysts attribute this reassessment to rising international oil prices and heightened geopolitical uncertainty, both of which have implications for inflation and external balances.

Topline Securities has projected a 50 basis point increase in the upcoming MPC decision, citing the need to contain inflationary pressures arising from elevated energy costs and their pass-through effect on the broader economy.

Secondary market indicators further corroborate expectations of a tighter monetary stance. Yields on six-month treasury bills and the six-month Karachi Interbank Offered Rate (KIBOR) are currently recorded at approximately 11.22% and 11.44%, respectively—levels that exceed the prevailing policy rate of 10.5%. These indicators had recently peaked at 11.78% and 11.79% before moderating in response to easing geopolitical tensions following a ceasefire development.

Looking ahead, survey respondents indicate expectations of a relatively elevated interest rate environment. Approximately 59% anticipate that the policy rate will remain above 10.5% by December 2026, while 29% expect no change and 6% foresee a decline to 10% or below.

Inflation expectations also remain on the higher side, with 51% of participants projecting inflation exceeding 9% over the next 12 months, while 23% estimate it within the 7% to 9% range.

Currency outlook remains cautious, with 59% of respondents expecting the Pakistani rupee to trade above 285 against the US dollar. A further 31% anticipate a range between 280 and 285, while only 10% project relative appreciation within the 275 to 280 band.

In terms of geopolitical developments, 54.9% of participants believe that the ongoing conflict may persist for more than two weeks, while 20% consider the situation potentially prolonged or open-ended. In contrast, 26% expect a resolution within a two-week timeframe.