Finance Minister Muhammad Aurangzeb has hinted at a possible cut in the policy rate this year. He pointed to a steady decline in inflation as a key reason for the expected reduction. This announcement has raised market hopes for further monetary easing by the State Bank of Pakistan (SBP) to support economic growth.
Speaking at a recent event, Aurangzeb emphasized the independence of the SBP and its Monetary Policy Committee (MPC). He said they are responsible for setting the policy rate and managing the exchange rate. “Currently, the policy rate is at 11%. I always respect the autonomy of the State Bank and the MPC,” he stated. However, the finance minister expressed optimism about further cuts. He added, “Given current trends in average and core inflation, there is room for more action on the policy rate this year.”
Pakistan’s economy is showing signs of stabilization after a period of strict monetary policy aimed at controlling inflation. Earlier this year, the SBP reduced the policy rate to 11%, following consistent disinflationary trends.
Market analysts are watching closely, expecting the SBP to ease monetary policy further. This easing aims to balance inflation control while encouraging economic growth.
The finance minister’s remarks come amid positive signals from inflation data, which show that prices are stabilizing. The decline in core inflation is particularly encouraging, suggesting that the central bank can consider lowering the policy rate without risking inflation surges.
If the policy rate is reduced, borrowing costs for businesses and consumers could decrease. This may lead to more investment and spending, helping Pakistan’s economy recover faster.
Overall, the finance minister’s comments signal a cautious but optimistic approach. The SBP will likely continue to monitor inflation and economic data before making further decisions on the policy rate. This balanced approach aims to support economic growth while keeping inflation in check.
If inflation continues to decline, the SBP may consider another rate cut before the end of the year.
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