January 26 Monetary Policy Update: Interest Rate Cut Expectations Rise
Pakistan’s economic outlook shows steady improvement at the start of the year.
As a result, expectations are rising around the January 26 monetary policy update.
The Pakistani rupee has strengthened against the US dollar.
At the same time, inflation has stayed within a manageable range.
Therefore, economists believe conditions now support another interest rate cut.
The State Bank of Pakistan will announce its first policy decision of the year on January 26.
Survey Shows Strong Expectations of a Cut
A recent survey by a local research firm highlights market sentiment. Notably, 80 percent of participants expect a reduction in the policy rate. This confidence reflects improving financial indicators.
In addition, falling inflation has eased pressure on monetary tightening. Many experts see this as a positive signal for borrowers. However, they also urge careful and balanced decision making.
How Much Could Rates Change?
The survey results reveal varied expectations. For example, 56 percent predict a 50 basis point cut.
Meanwhile, 15 percent expect a deeper one percent reduction. This view reflects optimism about sustained economic stability.
On the other hand, 20 percent foresee no change in rates. They cite global uncertainties and fiscal risks as key reasons. A smaller group expects modest movement. About 5 percent anticipate a 25 basis point cut.
Only 3 percent believe a 75 basis point cut is likely. Previously, the central bank reduced rates by 50 basis points on December 15.
Outlook Through Mid-2026
Looking ahead, opinions remain divided. Nearly 49 percent expect rates to stay at 10 percent until June 2026. However, 46 percent believe rates could drop below that level. They point to improving reserves and stable currency trends. The report also highlights rising remittances.
In addition, easing price pressures support further flexibility. As a result, analysts suggest rates may fall below 10.5 percent. Such a move could encourage investment and economic activity. Overall, the January 26 monetary policy update will be closely watched. Its outcome may shape Pakistan’s economic direction in the coming months.
