Karachi: A significant shift in expectations regarding Pakistan’s monetary policy outlook has emerged, with 80% of market participants now anticipating a rate cut in the upcoming Monetary Policy Committee (MPC) meeting scheduled for January 26, 2026. This marks a departure from the previous poll conducted for the December 2025 MPC meeting, where 70% of respondents expected no change in the interest rate.
According to JS Global, the latest survey reveals that among those predicting a rate cut, 56.4% foresee a 50 basis points (bps) reduction, 15.4% anticipate a 100 bps cut, 5% expect a modest 25 bps cut, and 3% project a 75 bps reduction. Conversely, 20% of participants still expect the interest rate to remain unchanged.
The shift in market perception is attributed to recent economic indicators, including lower-than-expected inflation readings in recent months, improved remittance flows bolstering the external accounts, and relative stability in the PKR/USD exchange rate. In the last monetary policy meeting on December 15, 2025, the State Bank of Pakistan reduced the policy rate by 50 bps, defying broader expectations of maintaining the status quo. During that session, six out of nine board members voted in favor of a 50 bps cut.
Current secondary market yields also suggest a forthcoming rate cut, with both the 6-month T-bills and the 6-month KIBOR trading below the prevailing policy rate of 10.50%. Additionally, the recent auction cut-off for 2-3 year Pakistan Investment Bonds (PIBs) fell below this benchmark rate, indicating investor expectations for a reduction.
Topline Research, which conducted a poll among key market participants, reports that 46% of respondents anticipate the policy rate to fall below 10% by June 2026, while 49% expect it to remain at 10%. The research firm has revised its forecast for the interest rate to 9.5% by June 2026, down from a previous estimate of 11%.
On the inflation front, 77% of respondents predict it will remain between 5-7%, with 16% expecting a range of 7-8%. The currency exchange rate is projected to be between Rs280-285 by June 2026, according to 64% of the participants.
This evolving outlook reflects a broader expectation of easing monetary conditions, driven by favorable economic indicators and market trends.