Islamabad 13 August: Pakistan’s Finance Minister Muhammad Aurangzeb on Wednesday hinted at the possibility of further policy rate reductions this year, citing a sustained decline in both average and core inflation.
His remarks have fueled expectations that the State Bank of Pakistan (SBP) may opt for additional monetary easing to stimulate economic growth.
Speaking at a public event, Aurangzeb stressed the independence of the SBP and its Monetary Policy Committee (MPC) in setting interest rates and managing the market-based exchange rate. “At present, the policy rate is at 11%. I am always very careful to respect the autonomy of the State Bank of Pakistan and the MPC,” he said.
Despite this caution, the finance minister expressed optimism about the potential for more rate cuts in the coming months. “Given the current inflation trends, whether it’s average inflation or core inflation, I believe there is room for more action on the policy rate. I am hopeful that, during this calendar year, we will see the policy rate moving south,” he added.
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The remarks come as Pakistan’s economy begins to stabilize after a prolonged period of tight monetary policy aimed at curbing inflation. In its last monetary policy decision earlier this year, the SBP cut its benchmark interest rate to 11%, marking the first reduction in several years.
Market analysts believe further easing could help spur private investment, support industrial growth, and reduce borrowing costs for businesses. However, they caution that aggressive rate cuts could risk reversing recent gains in price stability if global commodity prices rise.
Aurangzeb’s statement is being closely watched by financial markets, with investors anticipating the SBP’s upcoming policy announcements as a key indicator of the government’s growth and inflation balancing act for 2025.
