By Moaaz Manzoor

The State Bank of Pakistan (SBP) is expected to keep the policy rate unchanged at 11.5 percent in its monetary policy decision due on Monday, June 15, 2026, despite double-digit inflation, as market and policy experts argue that the latest price pressures are largely supply-side and administratively driven rather than demand-led.

A monetary policy survey by Topline Securities showed that market expectations are almost evenly split. Around 49 percent of respondents expected no change, while another 49 percent expected an increase. Of those expecting a hike, 34 percent anticipated up to 50 basis points, while 15 percent expected a 100-basis-point increase.

Topline Securities, however, said it expected the SBP to keep the policy rate unchanged. The report said uncertainty over the rate outlook was mainly driven by oil price volatility but noted that Brent crude had remained below $100 per barrel during the previous two weeks after touching $118 per barrel on April 29, 2026.

A separate Monetary Policy Advisory Note by the Policy Research and Advisory Council also recommended maintaining the policy rate at 11.5 percent. It argued that inflationary pressures are largely cost-push, supply-side, and administratively induced rather than demand-driven.

According to the advisory note, the Consumer Price Index (CPI) stood at 11.7 percent in May 2026. It said the main drivers included petroleum levies on petrol and diesel, global oil price pass-through, and electricity and gas tariff adjustments — factors not directly sensitive to interest-rate changes.

Speaking with Wealth Pakistan, Dr Ali Salman, Chief Executive Officer of the Policy Research Institute of Market Economy, said current inflation was largely supply-side, driven by global energy costs and government-administered fuel and energy tariffs rather than demand overheating.

“Therefore, the SB Pakistan should keep the policy rate unchanged at 11.5 percent. A further increase in the rate will raise debt-servicing costs and slow the recovery of private investment,” he said.

Similarly, Ali Najib, Deputy Head of Trading at Arif Habib Limited, said rising oil prices and supply-side inflation risks stemming from the Middle East conflict had increased the likelihood of a hawkish stance, but he still expected the SBP to keep the policy rate unchanged.

“Inflation remains broadly within expectations, external accounts continue to benefit from strong remittance inflows, and economic activity is still in the recovery phase,” he said.

Najib cautioned that further escalation in regional tensions and sustained pressure on global energy prices could tilt the balance toward a rate hike in subsequent meetings.

In contrast, Syed Zafar Abbas, Manager at Zahid Latif Securities, said the policy rate could increase in the next monetary policy decision. He said rising National Savings rates, inflation readings, petrol and diesel prices, FBR revenue pressures, and uncertainty in the international environment indicated that rates may have to move upward.

“In the next monetary policy, rates may increase. The rise in National Savings rates, inflation numbers, and the impact of petrol and diesel prices are important indicators,” he said.

Abbas said the policy rate could increase by at least 50 basis points and possibly up to 100 basis points if these pressures persist.

For the SBP, the June 15 decision will require a balance between managing inflation expectations and supporting economic recovery. If oil prices remain contained and regional tensions do not escalate, the central bank is likely to retain policy space and delay further tightening. However, a fresh spike in global energy prices or persistent inflation pressure could strengthen the case for a rate hike in later meetings.

Credit: INP-WealthPk