SBP Monetary Policy: 50bps rate hike expected, Survey
KARACHI (TKP Report): The State Bank of Pakistan (SBP) is scheduled to announce its monetary policy decision on Monday, October 26, with a majority of respondents in a recent survey by CFA Society Pakistan expecting an increase of 50 basis points in the policy rate amid persistent inflationary pressures, rising international oil prices and uncertainty surrounding the economic outlook.
According to the CFA Society Pakistan’s recent Monetary Policy Survey, 56 percent of respondents expect the central bank to raise the policy rate by 50 basis points, while 11 percent anticipates a more aggressive increase of 100 basis points. Meanwhile, 33 per cent expect the SBP to maintain the existing rate without any change.
The survey reflects market participants’ expectations ahead of the Monetary Policy Committee’s meeting, although the final decision rests with the central bank.
The policy rate currently stands at 11.5 per cent after the SBP increased it by 100 basis points in April and subsequently maintained the rate at its July and September meetings. The forthcoming announcement will be closely watched by investors, businesses, banks and borrowers for indications of the central bank’s approach to controlling inflation while supporting economic recovery.
Inflation and oil prices shape expectations
The growing expectation of monetary tightening comes against the backdrop of elevated inflation and uncertainty in global energy markets. Higher fuel prices, electricity costs and food inflation have increased concerns that price pressures could remain above the central bank’s medium-term target.
Pakistan’s headline inflation reached 10.26 per cent in September, according to an October monetary policy assessment published by the Pakistan Institute of Development Economics. The central bank aims to bring inflation within its target range of 5 to 7 per cent over the medium term.
The CFA Society survey also highlights concerns about international oil prices. Asked about the average oil price expected by June 2027, 49 per cent of respondents anticipated prices between $90 and $100 per barrel, while 29 per cent expected a range of $80 to $89 per barrel.
Another 15 per cent projected oil prices above $100 per barrel, whereas only 7 per cent expected prices to remain below $80 per barrel.
The findings indicate that a substantial proportion of respondents expect energy costs to remain elevated, potentially adding to Pakistan’s import bill and increasing inflationary pressure through fuel, transportation and production costs.
Rupee outlook remains uncertain
The survey also examined expectations for the Pakistani rupee against the US dollar by December 31, 2026.
Around 47 per cent of respondents expect the exchange rate to fall within the range of Rs278 to Rs288 per dollar, while 35 per cent anticipate relative stability through December.
Meanwhile, 9 per cent expect the rate to remain between Rs275 and Rs277 per dollar, while another 9 per cent foresee a weaker rupee in the range of Rs288 to Rs300 per dollar.
These projections reflect differing assessments of Pakistan’s external-sector outlook and the potential impact of international commodity prices on foreign exchange demand.
Growth versus price stability
The central bank faces a difficult balancing act as it considers whether further monetary tightening is necessary. An increase in the policy rate could help contain inflationary expectations and support monetary stability, but it would also raise borrowing costs for businesses and consumers.
Higher interest rates can make working capital more expensive for manufacturers, traders and small businesses, potentially discouraging investment and slowing economic activity. Government borrowing costs could also increase.
FPCCI and business representatives have argued that expensive credit could constrain industrial expansion at a time when the economy needs stronger investment and employment generation. Conversely, proponents of a rate hike maintain that persistent inflation requires a firm response to prevent price pressures from becoming entrenched.
Not all economic assessments favour an immediate increase. Experts have recommended maintaining the policy rate at 11.5 per cent while adopting a cautious stance, arguing that the central bank should assess whether inflationary pressures are becoming sufficiently persistent to justify additional tightening.
The October 26 decision will therefore signal how the SBP weighs inflation risks against the need to sustain economic growth. While the CFA Society survey points towards a possible 50-basis-point increase, the central bank’s final decision will depend on its assessment of inflation, international oil prices, exchange-rate conditions and the broader economic outlook.