Islamabad: After a prolonged period of high interest rates, Pakistan may finally witness a reduction in the policy rate, with expectations pointing towards a cut bringing the benchmark interest rate to between 10% and 10.5% starting July 31, 2025.

According to official sources, the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP), chaired by Governor Jameel Ahmed, will convene on Wednesday, July 31, to review the country’s economic indicators and decide the new policy rate. This will be the first monetary policy decision of the fiscal year 2025–26, and one that may signal the start of an easing cycle.

Expected Rate Cut After Prolonged Tight Monetary Stance

Economists anticipate that the SBP may reduce the policy rate by 100 to 150 basis points, a significant move given the historically tight monetary policy over the last two years. However, many experts also expect the MPC to act cautiously, possibly opting for a gradual cut of 50 to 100 basis points, bringing the rate down from the current 11% to a range between 10.0% and 10.5%.

This anticipated shift reflects easing inflationary pressures, stabilization of the exchange rate, and a relatively improved economic outlook following a series of structural reforms and ongoing engagements with the International Monetary Fund (IMF).

State Bank Releases Full-Year MPC Meeting Schedule for FY 2025–26

In a move to enhance institutional transparency and build stakeholder confidence in Pakistan’s monetary framework, the SBP has also released the advance calendar for all upcoming Monetary Policy Committee meetings for the entire fiscal year 2025–26.

As per the schedule, the MPC will hold eight meetings during the financial year. The confirmed dates are:

1. Wednesday, July 31, 2025 – First MPC meeting of FY 2025–26
2. Monday, September 15, 2025 – Second meeting
3. Monday, October 27, 2025 – Third meeting
4. Monday, December 15, 2025 – Fourth meeting
5. Monday, January 26, 2026 – Fifth meeting
6. Monday, March 9, 2026 – Sixth meeting
7. Monday, April 27, 2026 – Seventh meeting
8. Monday, June 15, 2026 – Eighth and final meeting of the fiscal year

The SBP clarified that in case of unforeseen economic or political developments, any of these meetings may be rescheduled, and a revised date will be announced accordingly. A new advance calendar for FY 2026–27 is expected to be published in July 2026.

Why the Rate Cut Matters

A reduction in the policy rate will have widespread economic implications:

• Lower Borrowing Costs: It will reduce the cost of credit for businesses and consumers, potentially boosting private investment and consumption.
• Encouragement for Industrial Activity: Especially for small and medium enterprises (SMEs), a lower rate could provide relief and support recovery after years of high financing costs.
• Impact on Inflation and Currency: While the rate cut may stimulate demand, the central bank will need to monitor whether this translates into higher inflation or pressure on the rupee.

Economists have urged the central bank to balance price stability with growth stimulation, especially as Pakistan looks to attract FDI, control the fiscal deficit, and boost industrial exports.

Global and Domestic Influences on Policy

The decision will also be influenced by international economic trends, including the U.S. Federal Reserve’s policy stance, global oil prices, and geopolitical events. On the domestic front, the government’s budgetary commitments, IMF conditionalities, and the performance of key macroeconomic indicators such as the current account deficit and foreign exchange reserves will also be under consideration.

Looking Ahead

The upcoming MPC meeting on July 31 will be a bellwether moment for investors, banks, businesses, and households alike. A shift in monetary policy could pave the way for broader economic revival, especially if accompanied by fiscal discipline, exchange rate stability, and governance reforms.

Pakistan’s financial markets, business chambers, and global rating agencies will be watching closely, as a rate cut could signal renewed confidence in the economy’s stabilization trajectory.