Analysts expect SBP to maintain status quo as Middle East conflict escalates

The State Bank of Pakistan (SBP) is expected to keep its benchmark policy rate unchanged at 11.5% next week, as escalating geopolitical tensions in the Middle East and rising oil price risks overshadow improving domestic inflation and mounting arguments for monetary easing, according to market experts.

The SBP’s Monetary Policy Committee (MPC) is expected to meet next week on Monday, i.e. 27 July, 2026; however, both AKD Research and Topline Securities expect no change in the policy rate.

In a poll conducted by Topline Securities, 97% of respondents expect the policy rate to remain unchanged at the Jul 27, 2026 MPC meeting. Meanwhile, the remaining 3% anticipate a 100bps cut.

In its report, AKD Securities said that a comfortable external account position, supported by tight monetary policy, prudent fiscal management, improving credit rating and continued progress on structural reforms, is a positive economic indicator.

At the same time, weakening leading economic indicators and a contraction in money supply strengthen the case for supportive monetary easing.

“However, renewed geopolitical tensions following the escalation of the US-Iran conflict, including the re-closure of the Strait of Hormuz and Houthi threats of a naval blockade targeting Saudi Arabia, have heightened uncertainty.

“This, along with upcoming floods forecast during the last week of this month, has renewed inflationary pressures.

“Subsequently, we expect the SBP to maintain the policy rate unchanged at the upcoming MPC meeting,” it said.

Topline echoed similar views; it noted that following the signing of the US-Iran Memorandum of Understanding (MoU) on June 18, 2026, the easing of geopolitical tensions and the softer international oil prices led market participants to increasingly price in cumulative rate cuts of 100–150bps over the next two to three MPC meetings.

However, renewed tensions between the US and Iran over the past two weeks have reversed part of that optimism.

“In light of these developments, we expect the SBP to maintain the policy rate at 11.5% in its July 27, 2026 MPC meeting,” it said.

Meanwhile, Topline expects inflation to remain well contained, but warned that heightened geopolitical uncertainty and the recent rebound in oil prices warrant a cautious approach before considering any policy easing.

“We expect inflation to average at 7.0-8.0% during FY27E,” Topline said.

AKD Securities, however, forecast inflation to average 5.9% in FY27E from an average of 7.1% in FY26, primarily because of disinflation in the Transport Index as “we expect international oil prices to remain subdued on enhanced likelihood of permanent resolution of US-Iran conflict”.