With the last downward revision of policy rate to 11 percent in May’25, the intriguing question for FY26 is whether the easing cycle has ended and FY26 will witness a ‘trough’ year for policy rate or more easing/tightening is on the horizon with expected inflation of 7-8 percent during FY26?

Instead for looking at the crystal ball for answers, it would be interesting to look at the historical trend of Policy rates during the last 10 years and infer some stylistic views or indulge in casual empiricism for answers.

An upfront two caveats are in order: Ideally to ascertain a robust pattern in rates cycles a longer period of observed rate cycles is desirable, but this analysis is circumscribed by the fact that Policy (target) rate instrument was introduced in 2015. Secondly, periodic policy rates announcements are based on complex interaction of current and expected external and structural/intertemporal challenges facing the economy.

Only inflation rate and changes in PKR/USD will tangentially accompany the current rate cycles discussion. For graphical depiction of SBP trade cycles see: https:// tradingeconomics.com/pakistan/interest-rate.

Starting with two peaks in the rates cycle during the 10-year period, the first peak of 13.25 percent from a low of 6.0 percent in Jan 2017 was reached in July 2019. The duration of the peak was 8 months. Easing of the policy rate began in Feb 2020.

The corresponding CPI annual rate of inflation rate in 2019 and 2020 was 10.58 and 9.74 percent respectively, yielding roughly a........

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