This is the central bank’s first hike in almost three years.

The decision was in line with market expectations, which anticipated the central bank to raise the rates in the wake of escalating geopolitical tensions in the Middle East, which have swelled energy prices, raising fears of a new wave of inflation.

The MPC, in its statement, noted that prolonging of the Middle East conflict has intensified risks to the macroeconomic outlook. In particular, the global energy prices, freight charges and insurance premiums continue to remain significantly above pre-conflict levels.

Furthermore, the supply chain disruptions have contributed to the prevailing uncertainty.

“While the incoming data has been broadly in line with the MPC’s expectations so far, the impact of these global developments will be visible in key economic indicators going forward. In this backdrop, the committee assessed that inflation is likely to increase and remain above the target range in the next few quarters.

“Accordingly, the MPC deemed it necessary to maintain a tighter policy stance to keep inflation expectations anchored and contain second- round effects of the current supply shock to bring inflation within the target range.

“This will be important to preserve macroeconomic stability, which is necessary for achieving sustainable economic growth,” read the statement.

Apart from the geopolitical events in ME, the MPC noted the following key developments since its last meeting.

“First, inflation rose to 7.3% in March, while core inflation inched up to 7.8%.

“Second, inflation expectations and confidence of consumers and businesses deteriorated in the latest surveys.

“Third, real GDP grew by 3.8% in H1-FY26 as compared to 1.9% in the same period last year.

“Fourth, the current account posted a small surplus during July-March FY26.

“Fifth, despite significant debt repayments, SBP’s FX reserves as on April 24, 2026, are around $15.8 billion, supported by the issuance of Eurobonds, as Pakistan re-entered international capital markets after a gap of over four years.

“Lastly, the staff level agreement was reached with the IMF on March 27, 2026,” it added.

The MPC viewed today’s decision as important to achieve the objective of price stability over the medium term.

The committee also reiterated the important role of the continued build-up of external buffers and fiscal discipline.

“These efforts have contributed to stronger initial economic conditions at the start of the ongoing geopolitical conflict as compared to similar shocks in the recent past.

“The MPC also emphasised the importance of undertaking structural reforms to make the external account more resilient to the evolving global landscape and to ensure sustainable economic growth,” read the MPS.

Real Sector

The MPC noted that high-frequency industrial and services sector indicators showed some signs of moderation in March.

“In agriculture, growth prospects have moderated slightly, driven mainly by lower than anticipated wheat production as per the first estimates reported by the Federal Committee on Agriculture.

“This, along with the expected spillover of the ongoing Middle East conflict on industrial and services sector activity in Q4, is expected to result in real GDP growth for FY26 turning out closer to the lower bound of the earlier projected range,” read the statement.

The MPC was of the view that the moderation in economic activity is likely to continue in FY27, though the outlook is subject to multiple risks, including the duration and intensity of the ongoing conflict.

External Sector

The MPC expects the current account in FY26 to remain closer to the lower bound of the earlier projected range, despite a challenging external environment, including a significant worsening of terms of trade.

The MPC assessed that the SBP’s FX reserves will reach above $18 billion by June 2026.

Fiscal Sector

The MPC shared that the financing side data indicate that the fiscal deficit remained contained till March.

“However, the ongoing Middle East conflict has made fiscal management more challenging.  The pass-through of higher international oil prices to domestic consumers necessitated support for vulnerable groups through targeted subsidies.

“To achieve the targeted full-year primary surplus, a larger cut in expenditures may be required,” it said.

Inflation outlook

Going forward, the MPC assessed that the current supply shock may push inflation to double digits in the coming months before it starts to ease subsequently.

“However, inflation is expected to stay above the upper bound of the target range of 5 – 7% for most of FY27.”

The MPC noted that this outlook is subject to multiple risks, particularly the duration and intensity of the ongoing conflict, the extent of pass-through of changes in global energy prices to the domestic economy, and potential fiscal slippages.

“This move signals tighter monetary conditions as the central bank intensifies its efforts to curb inflation,” said Behtari Capital.

At its previous meeting on March 9, 2026, the MPC, in line with market expectations, kept its benchmark policy rate unchanged at 10.5%.

Market experts showed mixed expectations regarding the central bank decision as the geopolitical situation remains tense.

Renowned analyst Ali Khizar, Director of Research at Business Recorder, had called for a 50 bps increase.

Khizar noted that if the MPC decides not to increase the policy rate, the market may expect a bigger change in June, and uncertainty may grow. To counter that, SBP needs a measured approach by giving the right signal through a token increase, he said.

Arif Habib Limited (AHL) anticipated that the SBP would keep the policy rate unchanged. “The world is negotiating peace amid uncertainty; therefore, at a time like this, we believe policy must continue to lean toward discipline over impulse.”

On the other hand, Topline Securities, another brokerage house, expected interest rates to increase by 50bps “to absorb the impact of rising oil prices, and its indirect/lagged impact on other commodities and to contain nonessential imports”.

Citing its survey, Topline said that 53% of its participants were expecting a rate increase.

The brokerage house attributed the change in participants’ views to elevated global crude oil prices and uncertainty over the longevity of the war.

Meanwhile, a Reuters poll found that the central bank would hold its key policy rate at 10.5%, though some analysts warn that rising oil prices from the Iran-US conflict could prompt the first rate hike in nearly two years.

Six of the 10 analysts surveyed by Reuters expected the SBP to keep the rate unchanged, while three forecast a 50bps increase and one a larger 100bps hike.

“The SBP is expected to keep the policy rate unchanged at 10.5%, signalling caution amid a rapidly evolving global backdrop,” said Arif Habib Limited (AHL) in a report on Friday.

The central bank, in its previous MPC, decided to keep its benchmark policy rate unchanged at 10.5%. The decision was against market projections, which expected a cut in the key interest rate.

AHL, in its report, noted that a flare-up of the US-Iran conflict has upset markets, sending oil and other commodities sharply higher and exerting pressure on financial markets worldwide.

SBP likely to cut policy rate in upcoming MPC meeting, say analysts

“Against this uncertain environment, the SBP is likely to maintain the status quo, preferring to wait and see how geopolitical developments unfold before adjusting policy,” said AHL.

The report shared that the outbreak of conflict in the Middle East has already pushed crude prices higher, which, if sustained, could weigh heavily on Pakistan’s external account, given the country’s reliance on imported energy.

“Estimates suggest that every $10 per barrel increase in oil prices could widen the current account deficit by around $2 billion annually. Headline inflation may also rise by roughly 0.4% directly, while indirect effects could be larger, pushing CPI further above the medium-term target range of 5-7%,” it said.

On the other hand, remittances from GCC countries, which account for roughly 50-55% of Pakistan’s total inflows, may provide some near-term support.

“In light of geopolitical tensions in the Middle East, expatriates may increase transfers home as a precautionary measure, with the upcoming Eid season further boosting inflows, cushioning the current account amid rising imported inflation,” it said.

SBP seen holding rates steady as the oil rally clouds inflation outlook

AHL, while citing its survey results, said that market sentiment ahead of the MPC strongly favours a pause. “Our survey result shows; 96% of participants expect the policy rate to remain unchanged, while only 4% anticipate a 50bps cut,” it said.

Similar views were expressed by Topline Securities, another brokerage house, in its report on Friday.

“Unlike the previous poll, where 80% were expecting a rate cut, now 92% are expecting status quo due to war like situation in region, which has jacked up Brent oil prices by 25% in the last 2-3 weeks,” said Topline.

It shared that of the remaining 8%, 6% are expecting rates to increase by 25-50bps, and 2% expect rates to increase by 50-100bps. While no one expects a rate cut.

“We also believe interest rates will remain unchanged as the impact of this regional war on domestic inflation in the form of rising oil prices and its possible shortage is yet to unfold. However, if this tense situation continues for a longer period, an interest rate hike to mitigate its impact cannot be ruled out,” it noted.

Topline attributed the shift in market perception to “regional tensions, inflation impact of rising oil and LPG prices, and to account for any possible devaluation of currency”.

Suleman Khan (28) and Qasim Khan (26) — called out tactics intended to “break Imran Khan” in prison, adding how their father’s strength and faith will not allow that to happen.

Imran has been in solitary confinement since August 2023, and serving a sentence at the Adiala Jail in the £190 million corruption case while also facing pending trials under the Anti-Terrorism Act related to the May 9, 2023 protests.

Speaking with X influencer Mario Nawfal on why they chose to speak out now, Qasim said, “We’ve gone through the legal routes. We’ve gone through every route that we thought would potentially get him out.”

He added: “What we want is international pressure on Pakistan right now, because currently he’s living in inhumane conditions. They’re not giving him basic human rights. They’re not really doing anywhere near enough. And what we want is global pressure.”

The brothers also added that Imran did not want them to participate in politics in Pakistan, the reason being the dominance of dynastic politics and the dominance of “two established parties in Pakistan”.

The brothers added that they had taken permission from Imran to give the interview.

The two have remained away from the spotlight, while their mother, British journalist and screenwriter Jemima Goldsmith, has stressed that her sons have nothing to do with Pakistani politics.