ISLAMABAD – Finance Minister Muhammad Aurangzeb has indicated that Pakistan could see another interest rate cut before the end of this year, pointing to improved economic indicators and a sharp decline in inflation as key factors providing the State Bank of Pakistan (SBP) with room to ease monetary policy further.
Speaking at an economic forum, Aurangzeb reiterated that while the decision lies solely with the SBP’s Monetary Policy Committee, the government sees “space to do more” in terms of reducing the policy rate. He noted that both average inflation and core inflation have eased to levels that justify additional monetary easing.
Economic experts share this view. Leading market watchers, including Topline Securities and Arif Habib Ltd., have projected that the SBP could lower the rate by as much as 100 basis points by December, potentially bringing it down to 10 percent. These forecasts are fueled by declining inflation, improved foreign exchange reserves, and a gradual stabilization of the economy.
Since mid-2024, Pakistan has been on an aggressive monetary easing path, cutting the interest rate from a record 22 percent to 11 percent—a massive 1,100 basis point drop. This has helped ease borrowing costs, boost business confidence, and spur activity in key sectors such as manufacturing, agriculture, and construction.
Aurangzeb stressed that inflation management remains the government’s top priority. “We have worked hard to bring inflation down and strengthen our economic fundamentals. Now we can start thinking about measures that will support growth,” he said.
Analysts, however, caution that risks remain. Any surge in global oil or commodity prices, unexpected currency pressure, or fiscal slippages could slow the pace of rate cuts. Still, with the current economic trajectory, most market observers believe Pakistan is poised for a further boost to investment and growth as borrowing becomes cheaper.
This story has been reported by PakTribune. All rights reserved.