KARACHI: Following the State Bank of Pakistan’s (SBP) decision to keep the policy rate unchanged at 12%, the Karachi Interbank Offered Rate (KIBOR) saw a significant rise on Tuesday, with rates for tenors ranging from one-week to one-year increasing across the board.
KIBOR reflects the average interest rate at which banks lend to one another in the interbank market.
According to data from Arif Habib Limited (AHL), the one-week KIBOR climbed by 34 basis points (bps) to 12.41%, while the two-week rate surged by 37bps to 12.4%. The one-month KIBOR rose by 41bps to 12.35%, and the three-month tenor increased by 19bps to 12.05%. The six-month rate jumped by 22bps to 12%, the nine-month rate ticked up by 19bps to 12.15%, and the one-year tenor rate increased by 16bps to 12.13%.
The SBP’s decision to maintain the key interest rate at 12% on Monday came as a surprise to markets and analysts, who had expected a rate cut of 50bps, following a lower inflation reading in February.
In its statement, the Monetary Policy Committee (MPC) highlighted a sharp decline in perishable food item prices, which, along with sufficient stocks of non-perishable goods, helped ease overall food inflation. Additionally, global oil prices, the stable exchange rate, and favorable base effects contributed to lower energy prices.
However, the MPC also noted that core inflation remains high and persistent, which has been more resilient than anticipated. The committee projected that inflation would decrease further before gradually stabilizing within the target range of 5-7%.
“The inflation outlook remains subject to risks stemming from volatility in food prices, energy price adjustments, additional fiscal measures, protectionist policies in major economies, and the uncertain trajectory of global commodity prices,” the MPC added.
