Karachi, March 7, 2026 – The upcoming monetary policy announcement by the State Bank of Pakistan has become the center of attention for investors and economists after the government sharply increased petroleum prices earlier this week.
The central bank is scheduled to announce its next policy decision on March 9, 2026, and market participants are closely watching whether the recent spike in fuel prices could push the regulator to revise interest rates.
Fuel Price Shock Raises Inflation Concerns
On March 6, 2026, the government increased the price of petrol and diesel by Rs55 per litre, a move that analysts believe could trigger a new wave of inflation across Pakistan. Higher fuel costs usually translate into increased transportation expenses, which eventually push up the prices of essential goods and services.
Economists warn that the sudden jump in petroleum prices could significantly affect household budgets and business costs in the coming weeks.
Analysts Expect SBP to Hold Policy Rate
Despite the fuel price shock, analysts at Arif Habib Limited expect the central bank to maintain the policy rate at 10.5%, at least in the upcoming meeting.
According to their analysis, the SBP may adopt a wait-and-see approach due to the rapidly evolving geopolitical environment, particularly the ongoing tensions between the United States and Iran that have disrupted global financial markets.
Oil Price Surge Adds Pressure
The conflict in the Middle East has pushed global oil prices significantly higher:
| Oil Benchmark | Price Change |
| Brent Crude | +18% |
| WTI Crude | +21% |
| Arab Light | +16% |
Economists estimate that every $10 increase in oil prices could widen Pakistan’s current account deficit by about $2 billion annually. Additionally, higher oil prices could push inflation up by around 0.4 percentage points directly, with further indirect effects on food and transport costs.
Currently, average inflation during the first eight months of FY26 stands at 5.4%, slightly below 6.0% recorded last year, while core inflation remains elevated at 7.4% year-on-year.
Remittances May Cushion External Pressure
Despite the risks, Pakistan could receive some support from overseas remittances, particularly from Gulf countries. Around 50–55% of Pakistan’s remittance inflows originate from GCC economies, and analysts believe geopolitical uncertainty could encourage expatriates to send more funds home.
Seasonal transfers ahead of Eid al Fitr may also support inflows.
Before the recent conflict, Pakistan posted a current account surplus of $121 million in January 2026, though the cumulative deficit for 7MFY26 stood at $1.07 billion, compared with a surplus of $560 million a year earlier.
Economic Growth Remains Resilient
Despite global uncertainties, Pakistan’s domestic economy has shown resilience.
• Large-Scale Manufacturing (LSM) grew 4.8% during the first half of FY26.
• GDP growth reached 3.7% in the first quarter of FY26.
• The central bank expects full-year growth between 3.25% and 4.25%.
Fiscal indicators also remain stable, with the government posting a PKR 541 billion fiscal surplus in the first half of FY26, while the primary balance recorded a surplus of PKR 4 trillion.
Money Market Signals Caution
The money market has started pricing in geopolitical risks. Treasury yields have gradually increased across tenors:
| Tenor | Increase in Cut-off Yield |
| 3-Month | +60 bps |
| 6-Month | +79 bps |
| 12-Month | +99 bps |
| 3-Year | +11 bps |
| 5-Year | +23 bps |
| 10-Year | +24 bps |
This indicates investors are becoming cautious while waiting for clear policy direction from the central bank.
Market Survey: Most Expect No Change
According to a market survey conducted by Arif Habib Limited, expectations ahead of the policy meeting strongly favor no change in interest rates.
Expected Policy Outcome Share of Respondents
| No change (10.5%) | 96% |
| 50 basis-point cut | 4% |
What to Watch
Market participants will closely monitor:
• Impact of the fuel price hike on inflation
• Global oil price trends
• Geopolitical developments in the Middle East
• Signals from the State Bank of Pakistan on inflation outlook
The upcoming monetary policy announcement is expected to play a key role in shaping Pakistan’s economic direction in the coming months.