Analysts Anticipate SBP to Hold Policy Rate Steady Amid U.S.-Iran Tensions

ISLAMABAD — Amid escalating U.S.-Iran tensions that have spurred volatility in global energy markets, Pakistani financial analysts indicated on Monday that the central bank is expected to maintain its current stance as it prepares to announce the latest monetary policy decision.

The State Bank of Pakistan’s Monetary Policy Committee is set to convene today, following its decision to retain the key policy rate at 11.5 % in June. This session marks the first policy announcement since the recent renewal of U.S.-Iran hostilities.

Although inflation has stayed relatively contained in recent months, a resurgence in global oil prices has complicated prospects for additional rate cuts, raising concerns about imported inflation and Pakistan’s external balance.

“I expect the SBP to keep the policy rate unchanged at 11.50 %,” Muhammad Waqas Ghani, head of research at JS Global Capital Limited, told Arab News, noting that heightened geopolitical tensions and the resulting uncertainty in global energy markets justify a cautious, wait‑and‑see approach.

Ghani added that a 50‑basis‑point rate hike remains a “low‑probability” scenario should the committee adopt an “exceptionally cautious” stance amid upside risks to imported inflation and external sector stability.

Ahsan Mehanti, chief executive officer of Arif Habib Commodities Limited, also expects the SBP to hold the policy rate steady, citing inflationary expectations driven by ongoing U.S.-Iran tensions. “No change expected due to inflationary pressures from ongoing US‑Iran tensions,” Mehanti told Arab News.

A recent poll by Topline Securities revealed that 97 % of market participants anticipate the central bank to keep the policy rate unchanged, with only 3 % foreseeing a 100‑basis‑point cut. Topline similarly projects that the SBP will retain rates at 11.5 %.

“The recent rebound in oil prices warrants a cautious approach before considering any policy easing,” the brokerage said, noting that geopolitical developments have diminished the likelihood of an imminent rate cut.

The report notes a marked shift in expectations over the past month. After a U.S.-Iran memorandum of understanding was signed in June, easing geopolitical risks and lower international oil prices led investors to price in cumulative rate cuts of 100‑150 basis points across the next two or three monetary‑policy meetings. Expectations weakened following renewed hostilities between Washington and Tehran, which pushed oil prices higher again.

The brokerage observed that the shift is evident in Pakistan’s debt market: six‑month Treasury bill yields dipped below the policy rate after the June agreement but have risen back to around 11.5 % over the past ten days as investors reassess the interest‑rate outlook.

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