Pakistan’s financial markets are going into this Monday with an unusual amount of uncertainty hanging over them. The State Bank of Pakistan holds its Monetary Policy Committee meeting on April 27 — and for the first time in nearly two years, a majority of market participants expect interest rates to go up rather than stay still. The reason is not domestic economic performance, which has been improving steadily. The reason is a war in the Middle East, surging oil prices, and an inflation figure that has quietly crept above the SBP own comfort zone.
The Headline Number: A Market Deeply Divided
The State Bank of Pakistan will convene its third Monetary Policy Committee meeting of 2026 on April 27, with financial market participants increasingly anticipating an interest rate increase amid ongoing geopolitical tensions and rising global oil prices. A recent survey conducted by Topline Securities shows that 53% of respondents expect the central bank to raise the policy rate in the upcoming review. Pravda USA
Among those predicting a hike, 41.2% anticipate an increase of 50 to 100 basis points, 10% expect a rise of 25 to 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 to 100 basis points. Pravda USA
A market split almost exactly down the middle — 53% vs 47% — is as close to a coin flip as monetary policy gets. That uncertainty itself is the story. As recently as the previous MPC survey in March, 92% of respondents had expected no change in rates. That shift of sentiment from near-unanimous hold to a majority expecting a hike happened in the space of a single month. Pravda USA
Where Pakistan’s Interest Rate Stands — And How We Got Here
Understanding the SBP Interest Rate Dynamics
To understand why this meeting matters so much, it helps to recall how dramatically Pakistan’s monetary policy has shifted over the past two years.
Since June 2024, the SBP has cumulatively reduced the policy rate by 1,150 basis points after it had reached a record high of 22 percent. The most recent cut of 50 basis points was implemented in January 2026. Wikipedia
That means Pakistan spent most of 2024 and early 2025 cutting rates aggressively — a welcome relief for businesses, borrowers, and a government carrying substantial debt. The policy rate currently sits at 10.5%.
Any increase on Monday would represent the first rate hike since before that easing cycle began — a meaningful pivot that would signal the SBP believes the inflation and external pressures it now faces require a tighter stance, not continued accommodation.
The Two Forces Pushing for a Rate Hike
1. Inflation Has Broken Out of the Target Range
Domestically, inflation has shown an upward trend, rising to 7.3% in March from 7% in February, exceeding the SBP’s target range of 5 to 7%. Some experts warn that inflation could climb further to around 10% in April. Wikipedia
This is a meaningful number. The SBP’s entire framework is built around keeping inflation within that 5 to 7% band. When CPI breaks above it — even modestly — it puts pressure on the committee to signal that it takes its inflation mandate seriously. A hike, even a small one, sends that message without requiring dramatic action.
Topline Securities argued that higher rates could help “absorb the impact of rising oil prices” and contain spillover effects on broader inflation and non-essential imports. Pravda USA
2. Global Oil Prices and the Iran-US War
The external factor is the most important one driving the shift in market expectations — and it is entirely outside the SBP’s control.
A ceasefire in the Iran-US war has so far failed to produce a lasting peace deal, keeping global oil markets on edge and Pakistan’s import bill elevated. Pakistan remains particularly vulnerable to rising energy costs due to its heavy reliance on imported fuel. A prolonged energy shock could also pressure the rupee and complicate the country’s commitments under its IMF stabilisation programme. Pravda USA
Fawad Basir, Head of Research at KTrade, said elevated oil prices may push the Monetary Policy Committee toward a rate hike. He projected a 100 basis points increase, describing it as a precautionary step rather than the start of a new tightening cycle. Wikipedia
The Case for Keeping Rates Unchanged
Not everyone is convinced a hike is the right move — and some of the most respected names in Pakistan’s brokerage industry are firmly in the hold camp.
Arif Habib Limited argued that the case for maintaining the policy rate at 10.5% “still holds weight,” emphasising that current inflationary pressures are largely supply-driven and temporary. “Policy must continue to lean toward discipline over impulse,” the firm said, adding that despite global uncertainty — particularly ongoing tensions involving the United States and Iran — Pakistan’s inflation outlook remains broadly anchored. Pravda USA
AHL said that Pakistan’s external position remained stable, with the country recording a current account surplus of $1.07 billion in March 2026, the highest in a year, supported by strong remittances and a narrowing trade deficit. Despite global oil prices hovering around $100 per barrel, the current account deficit for FY26 is projected at around $1.6 billion. Aaj English TV
JS Capital estimates average inflation at around 7.5% over the next 12 months, indicating that the central bank may opt to look past short-term pressures and keep the policy rate unchanged. Türkiye Today
The logic here is straightforward: if the inflationary pressure is coming from global oil prices driven by a geopolitical conflict, raising interest rates in Islamabad does not fix that problem. It cannot make oil cheaper. What it can do is slow down an economy that is only just beginning to recover — and that may be too high a price to pay for a symbolic signal.
What the Bond Markets Are Already Saying
The most honest read of where the market actually expects rates to go is not what analysts say — it is what prices already reflect in secondary markets.
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. Secondary market yields on six-month Treasury bills and KIBOR have risen above the current policy rate of 10.5%, suggesting expectations of a mild hike rather than aggressive tightening. Pravda USA
Bond yields at 11.22% and 11.44% above a 10.5% policy rate are the market’s way of saying: we think rates are going up, but we do not think they are going up a lot. That is consistent with a 50 basis point hike — the most widely anticipated scenario if the SBP does decide to move.
What About the Rupee and Broader Sentiment?
Currency expectations also reflect the pressure building in the system. Regarding the exchange rate, 59% of respondents expect the rupee to remain above 285 against the dollar, while 31% see it in the 280 to 285 range and 10% expect it between 275 and 280. Pravda USA
A weaker rupee makes imported goods — including oil — more expensive in local currency terms, which feeds directly into inflation. If the SBP wants to defend the rupee and signal commitment to price stability simultaneously, a modest rate hike achieves both goals at once.
On the geopolitical timeline, 54.9% of survey participants believe tensions could continue for more than two weeks. Another 20% view the situation as unpredictable with no clear timeline for resolution, while 26% expect the conflict to ease within two weeks. Pravda USA
That split on the conflict’s duration matters enormously. If the US-Iran war resolves quickly, oil prices normalise and the case for a hike weakens significantly. If it drags on, Pakistan faces months of elevated energy costs and continued pressure on its import bill — making a tighter monetary stance harder to avoid.
The IMF Factor
There is one more variable that cannot be ignored: Pakistan is currently operating under a $7 billion IMF programme — and the Fund has its own views on Pakistani monetary policy.
The SBP has said it aims to maintain a positive real interest rate under Pakistan’s $7 billion International Monetary Fund programme, with the IMF previously cautioning against premature easing. Pravda USA
With inflation at 7.3% and the policy rate at 10.5%, the real interest rate is currently positive — which technically means Pakistan is compliant. But if inflation accelerates toward 10% as some analysts fear, the real rate narrows significantly. A pre-emptive hike keeps that buffer intact and keeps the IMF comfortable.
The Bottom Line Before Monday
Pakistan’s Monetary Policy Committee walks into April 27 facing a decision that is genuinely close. The inflation data, the oil price shock, the IMF framework, and secondary market pricing all point in the direction of a modest hike. The strength of the current account, the supply-driven nature of price pressures, and the fragility of the economic recovery all argue for holding.
Arif Habib Limited said the immediate policy outlook remains dependent on evolving geopolitical conditions, with the next monetary policy decision in June 2026, alongside the federal budget, expected to provide clearer direction. Aaj English TV
In other words — Monday’s decision may be less about ending the debate and more about buying time to see how the Middle East crisis resolves. A 50 basis point hike would be a statement. A hold would be a calculated bet that the storm passes before the data forces the SBP’s hand.
Either way, Pakistan’s economy is being shaped right now not just by its own numbers — but by a war it had no part in starting.
Related Reading:
- Pakistan Economy 2026: Key Indicators and Outlook
- Pakistan Repays $2 Billion UAE Loan — What It Means
- Impact of the Iran-US War on Pakistan’s Economy
External Sources:
- ProPakistani — 53% Market Expects SBP to Increase Key Interest Rate
- Profit by Pakistan Today — SBP Set for April 27 Policy Meeting
- Business Recorder — SBP Seen Holding Rates as Oil Shock Splits Analysts
- Nukta — Pakistan Central Bank Faces Split Calls Ahead of Policy Decision
- Arif Habib Limited — Case for Holding Policy Rate at 10.5% Still Holds