Karachi – The State Bank of Pakistan (SBP) ’s Monetary Policy Committee (MPC) has decided to maintain the policy rate unchanged at 10.5% following its meeting on March 9, 2026, prioritizing stability over easing as the widening conflict in the Middle East sends shockwaves through global energy markets.
The decision, which aligns closely with market expectations, marks the second consecutive MPC meeting of the year to hold rates steady. The January 26 meeting had also kept the rate at 10.5%, despite earlier expectations of a cut.
The Geopolitical Context
The cautious stance is a direct response to the escalating US-Iran tensions, which have spiraled into a regional conflict. The war has driven Brent crude prices sharply upward to around $108 per barrel, a level not seen in years. For an oil-import-dependent nation like Pakistan, this surge poses a direct threat of imported inflation.
Following the global price spike, the Pakistani government was forced to increase petrol prices by Rs55 per litre last week, bringing the new price to Rs321.17 per litre.
Strong Market Consensus
A pre-MPC survey conducted by Topline Securities on March 6 captured the strong market sentiment for a hold. An overwhelming 92% of respondents had anticipated no change to the policy rate. This represents a notable shift from the January poll, where many participants had still been expecting rate cuts.
Key factors cited by analysts included the 25% spike in Brent oil prices and corresponding global diesel price jumps of 37-49% . These numbers raise serious concerns for Pakistan’s external account and inflationary trajectory.
Survey participants also offered a grim outlook on the conflict, with 62% expecting the regional turmoil to persist for 2-5 weeks. Market reactions showed caution leading up to the decision, with 58-85 bps increases observed in 6-month T-bill and KIBOR yields.
Looking Ahead
The SBP’s forward guidance remains data-dependent. Looking ahead to June 2026:
- 60% of survey respondents foresee the policy rate remaining at or near the current 10% level.
- 58% project average CPI inflation to stabilize around 7% .
- The market expects the PKR/USD to remain in the 280-285 range.
However, analysts warn that a prolonged conflict could exacerbate currency pressures, fuel inflation, and potentially force future rate adjustments upward if imported cost pressures intensify. The SBP has emphasized in previous statements a balanced approach to safeguarding price stability while nurturing sustainable growth recovery.
For now, the “cautious pause” is seen as support for ongoing macroeconomic stability efforts, building on prior rate reductions (including the 50 bps cut to 10.5% in December 2025), while allowing time to monitor the volatile energy price dynamics.
