SBP set for April 27 policy meeting as markets tilt toward rate hike

The State Bank of Pakistan (SBP) will hold its third Monetary Policy Committee (MPC) meeting of 2026 on April 27 to decide on the policy rate amid changing economic and external conditions.

Market expectations have shifted toward a possible rate increase, with a survey by Topline Securities showing a divided outlook.

According to the poll, 53% of participants expect a rate hike. Within this group, 41.2% anticipate an increase of 50–100 basis points, 10% expect a rise of 25–50 basis points, and 2% foresee a larger increase of over 100 basis points.

In contrast, 43% of respondents expect no change, while 4% see a potential cut of 50–100 basis points.

The shift in expectations follows earlier sentiment in March, when 92% of participants anticipated no change in the policy rate. Analysts attribute the change to rising global oil prices and uncertainty linked to ongoing geopolitical tensions.

Topline Securities expects a 50 basis point increase in the upcoming decision, citing the need to manage inflationary pressures from higher energy prices and their broader impact on the economy.

According to the brokerage firm's assessments, secondary market indicators also reflect expectations of a tighter stance. Yields on six-month treasury bills and six-month Karachi Interbank Offered Rate stand at 11.22% and 11.44%, respectively, above the current policy rate of 10.5%. These rates had recently peaked at 11.78% and 11.79% before easing following a ceasefire announcement.

On the outlook for interest rates, 59% of respondents expect the policy rate to remain above 10.5% by December 2026, while 29% see it unchanged and 6% expect it to fall to 10% or lower.

Inflation expectations remain elevated, with 51% of participants projecting inflation above 9% over the next 12 months, while 23% expect it in the 7–9% range.

Currency expectations also reflect pressure, as 59% of respondents expect the rupee to remain above 285 against the dollar, while 31% see it in the 280–285 range and 10% expect it between 275 and 280.

On geopolitical developments, 54.9% of respondents believe the current conflict may take more than two weeks to resolve, while 20% view it as open-ended and 26% expect a resolution within two weeks.