Karachi, January 23, 2026 – Pakistan’s financial markets are buzzing with optimism as expectations mount that the benchmark policy rate may finally fall into single-digit territory, ending a nearly four-year-long era of elevated interest rates.
The State Bank of Pakistan (SBP) is scheduled to unveil its next monetary policy decision on January 26, and analysts at Arif Habib Limited (AHL) are forecasting a 75 basis points cut, which would bring the policy rate down to 9.75%. If realized, this would mark the first sub-10% rate since March 2022, a milestone moment for investors, businesses and borrowers alike.
According to analysts, the stars are aligning for a long-awaited easing move. Inflation has cooled sharply, the macroeconomic outlook has improved, the rupee remains broadly stable, and the current account position is manageable. Adding to the momentum, global commodity prices—especially oil—have softened, while domestic demand and industrial activity are showing signs of revival.
Inflation data further strengthens the case. Headline inflation has comfortably settled within the SBP’s 5–7% medium-term target range. During 1HFY26, average inflation eased to 5.11%, down from 7.29% last year, while core inflation dropped sharply to 7.4% from 10.93%.
While risks such as base effects, seasonal pressures during Ramadan and Eid, and global geopolitical uncertainties remain, analysts believe these factors are temporary rather than structural. Inflation is projected to average 8.04% in 2HFY26, bringing the FY26 average to 6.7%, well within the SBP’s comfort zone.
All eyes are now on January 26, as markets await what could be a game-changing policy pivot for Pakistan’s economy.