RIZWAN BHATTI

KARACHI: The Karachi Interbank Offered Rate (KIBOR) on Monday fell 10 basis points (bps) on lower inflation figures.

According to State Bank of Pakistan’s (SBP) statistics six-month KIBOR fell by 10 bps on a day-to-day basis to set at 21.59 percent on Monday compared to 21.69 percent on Friday March 1, 2024.  KIBOR is an equilibrium interest rate for a given tenor at which banks want to lend money to other banks.

Overall, six months KIBOR has declined by 138 bps during the last 8-month as six months KIBOR was at stood 22.97 percent in June 2024.

Analysts said the decline in KIBOR was witnessed across all tenors after the release of official inflation statistics for February by the Pakistan Bureau of Statistics (PBS).  

As per PBS headline inflation clocked in at 23.1 percent on a year-on-year basis in February as against 28.3 percent in January this year.

Analysts said that inflation numbers are below expectation and the market is expecting monetary easing in the next monetary policy to be announced during this month. They said that lower KIBOR will also create new financing avenues for the private sector financing as, analysts said.

The next meeting of the Monetary Policy Committee of the SBP is scheduled to be held on March 18 and with lower inflation numbers, the committee is likely to cut the rate.

It may be mentioned here that the monetary policy committee in its last meeting held in January 2024, kept the key policy rate unchanged at 22 percent.

The SBP is already expecting significant decline in the second half, and the evolving risks, the MPC expects average inflation to fall in the range of 23-25 percent in FY24 and continue to trend down noticeably in FY25.