SBP expected to keep policy rate unchanged in first MPC of FY27

The State Bank of Pakistan (SBP) Monetary Policy Committee (MPC) is expected to meet today (Monday), its first meeting in fiscal year 2026-27, to decide on the key interest rate.

Last month, the central bank’s MPC decided to maintain the policy rate at 11.5%, stating that the current monetary stance remains appropriate to steer inflation towards the medium-term target range of 5-7%.

Analysts this time around too are expecting the SBP to keep its benchmark policy rate unchanged, as escalating geopolitical tensions in the Middle East and rising oil price risks overshadow improving domestic inflation and mounting arguments for monetary easing.

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.

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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.

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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.

Similar was said by JS Global, which noted that renewed geopolitical flare-ups and disruptions to critical energy trade routes have elevated global uncertainty, prompting expectations of a cautious stance from the SBP.

“With external risks outweighing the case for further easing, MPC is likely to keep the policy rate unchanged at 11.50%,” it said.

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