Single Digit Policy Rate Return Likely as SBP MPC Meets
The Single Digit Policy Rate may return soon as the MPC meeting approaches. The State Bank of Pakistan will meet on January 26, 2026. Market analysts expect another interest rate cut this month. Lower inflation and better stability support this outlook.
According to Arif Habib Limited, the SBP may cut rates by 75 basis points. As a result, the policy rate could fall to 9.75 percent. This move would mark a return to single digit territory. For many businesses, this change feels long overdue.
Inflation Trends Support Rate Cut
Inflation has cooled sharply in recent months. Therefore, policymakers now have more room to ease.
The currency remains mostly stable against the dollar. In addition, the current account stays within manageable limits. Global oil prices have also declined.
As a result, import pressures have eased. Domestic demand continues to recover. Industrial activity has also shown early signs of growth. Together, these factors support a gradual easing cycle. Analysts believe the SBP can cut rates without risking instability.
Room for a Bolder Decision
Arif Habib Limited sees the expected cut as realistic. Inflation trends remain supportive, while growth needs encouragement. Fiscal pressures also call for some relief.
Meanwhile, external stability appears intact. However, analysts see space for a larger cut. A 100 basis point move remains possible under stable conditions. Confidence in markets will play a key role. If sentiment holds, bolder action could follow.
Market Expectations Remain Divided
Last month, the SBP surprised markets with a 50 basis point cut. That move brought the policy rate down to 10.5 percent. Since the peak, total easing now stands at 1,150 basis points.
This trend has shaped market expectations. Topline Securities reports strong support for another cut. Its survey shows 80 percent of participants expect easing. Most respondents expect a 50 basis point cut.
Others see chances for deeper or smaller adjustments. Topline also highlights high real interest rates.
Despite this, the SBP may keep rates above average for stability.
