Karachi Interbank Offered Rate (KIBOR) for tenors ranging from one week to six months declined on Friday, reflecting market expectations for further monetary easing by the State Bank of Pakistan (SBP).
KIBOR, which represents the average interest rate at which banks lend to each other, showed a decrease across multiple tenors. Data from Arif Habib Limited (AHL) indicated that, on a day-on-day basis, the one-week KIBOR fell by 3 basis points (bps) to 11.34%, the two-week tenor rate dropped by 3bps to 11.23%, and the one-month KIBOR decreased by 1bps to 11.16%. The three-month and six-month rates also saw reductions of 1bps, settling at 10.86%.
The six-month KIBOR hit a 41-month low of 10.86%, the lowest since February 22, 2022, when it stood at 10.83%, AHL noted.
Analysts expect a 50bps cut in the upcoming monetary policy, supported by low inflation, a manageable current account deficit, and improved reserves. However, potential risks are there, such as the recent floods, which could lead to food inflation and pressure on the Pakistani rupee due to rising imports.
The Monetary Policy Committee (MPC) of the SBP is scheduled to meet on Wednesday, July 30, with market analysts predicting a 50bps rate cut in the first MPC meeting of the fiscal year 2025–26.
The SBP had previously kept the policy rate unchanged at 11% in its June 16 MPC meeting.
