Market divided ahead of State Bank policy meeting as analysts weigh rate outlook
Pakistan's financial markets are closely watching the State Bank of Pakistan's upcoming monetary policy announcement, with analysts divided over whether interest rates will remain unchanged or increase amid uncertainty in global and domestic economic conditions.
The Monetary Policy Committee (MPC) of the State Bank of Pakistan is scheduled to meet on June 15 under the chairmanship of Governor Jameel Ahmad.
The committee is expected to review key economic indicators before announcing its latest policy decision.
According to a survey released by Topline Securities, 49 percent of market participants expect the central bank to keep the policy rate unchanged.
However, an equal proportion of respondents anticipate a rate hike. The survey found that 34 percent of experts expect an increase of 50 basis points, while 15 percent foresee a larger increase of 100 basis points. Only 2 percent of participants favour a reduction in interest rates.
Despite the divided market outlook, Topline Research said its base-case expectation remained that the policy rate would stay unchanged in the upcoming review.
The report noted that fluctuations in international oil prices had created uncertainty in financial markets. It said Brent crude prices had declined from around $118 per barrel to nearly $93 per barrel, easing some inflationary concerns.
The survey also cited improving global market sentiment, supported by statements from U.S. President Donald Trump regarding an early end to ongoing conflicts, as well as Pakistan's diplomatic efforts, as factors supporting a stable interest-rate environment.
Nevertheless, money market indicators suggest expectations of some tightening. Analysts noted that the cut-off yield on six-month Treasury bills had reached 12.42 percent, while the six-month Karachi Interbank Offered Rate (KIBOR) stood at 12.50 percent, indicating room for a possible increase of 50 to 75 basis points.
Looking ahead, 53 percent of survey participants expect interest rates to remain above 11.5 percent through December 2026. Another 31 percent believe rates will stay around 11.5 percent, while 16 percent anticipate a rate cut before the end of the year.
The survey also revealed mixed views on inflation. About 20 percent of respondents forecast inflation exceeding 10 percent, while Topline Research expects average inflation to remain between 8 and 8.5 percent during fiscal year 2026-27.
On the exchange rate front, most analysts expect relative stability in the rupee. The majority forecast the U.S. dollar to remain within the Rs280 to Rs290 range, with Topline Research projecting the currency to trade between Rs283 and Rs286 by December 2026.
With inflation, global commodity prices and economic growth prospects all under scrutiny, investors and businesses are expected to closely monitor the State Bank's June 15 decision for signals on the direction of monetary policy in the months ahead.
Reporter: Ashraf Khan