KIBOR Rates Surge as SBP Keeps Policy Rate Unchanged

Following the State Bank of Pakistan’s (SBP) decision to maintain the interest rate at 12 percent, the Karachi Interbank Offered Rate (KIBOR) saw an increase across various tenors on Tuesday. KIBOR reflects the average interest rate at which banks are willing to lend to one another. According to data from Arif Habib Limited (AHL), the one-week KIBOR rose by 34 basis points (bps) to 12.41 percent, while the two-week rate increased by 37 bps to 12.4 percent. The one-month KIBOR climbed 41 bps to 12.35 percent, while the three-month rate edged up 19 bps to 12.05 percent. Similarly, the six-month KIBOR rose by 22 bps to 12 percent, the nine-month tenor increased by 19 bps to 12.15 percent, and the one-year rate gained 16 bps, reaching 12.13 percent. On Monday, the SBP unexpectedly held its key interest rate steady at 12 percent, defying market expectations of a 50-bps cut amid February’s lower inflation reading. “The sharp decline in perishable food prices, coupled with adequate stocks of major non-perishable items, contributed to the overall easing of food inflation,” the Monetary Policy Committee (MPC) stated. The statement also noted that global oil price moderation, a stable exchange rate, and favorable base effects helped contain energy prices. However, core inflation remained persistently high and more stubborn than anticipated. The MPC projected inflation to decline further before gradually rising and stabilizing within the target range of 5–7 percent. “This inflation outlook remains vulnerable to risks, including fluctuations in food prices, the timing and scale of energy price adjustments, additional revenue measures, protectionist policies in major economies, and uncertainty in global commodity markets,” the committee added.