SBP seen holding rates as oil shock splits analysts

ISLAMABAD: Pakistan’s central bank is expected to hold its key policy rate at 10.5% at its upcoming meeting, according to a Reuters poll, 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 expect the State Bank of Pakistan (SBP) to keep the rate unchanged in its next meeting on Monday, while three forecast a 50-basis-point (bp) increase and one a larger 100-bp hike, a hawkish shift not seen since before the central bank’s aggressive easing cycle began in mid-2024.

The SBP has cut rates by a cumulative 1,150 bps since June 2024, when they peaked at a record 22%, and last reduced them by 50 bps in January.

Oil shock clouds outlook

A ceasefire in the Iran-U.S. war has so far failed to produce a lasting peace deal, keeping global oil markets on edge and Pakistan’s import bill elevated.

Pakistan’s CPI inflation quickened to 7.3% year-on-year in March, up from 7% in February, breaching the SBP’s 5%–7% target range, and some analysts warned it could push toward 10% by April.

SBP to convene MPC meeting on April 27

“Elevated oil prices may force the MPC’s hand,” said Fawad Basir, head of research at KTrade, who projected a 100-bp hike, the most hawkish call in the survey, though he stressed it was “a precautionary measure,” not a shift toward a new tightening cycle.

Hold camp sees supply-driven shock

Analysts calling for no change argued the inflation spike was supply-driven and likely temporary. JS Capital estimated 12-month average inflation would settle around 7.5%, saying the central bank may opt to “look through the near-term pressures.”

Sana Tawfik, head of research at Arif Habib, pointed to a $1.07 billion current account surplus in March and a stable rupee as reasons for caution, warning that tightening “would risk undermining momentum without effectively addressing the largely supply-driven inflation pressures.”

Independent analyst Ammar Habib Khan backed a 50-bp hike, arguing that market yields had already priced in one.

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.