” KIBOR witnesses notable drop amidst lower inflation ” | NewsPKOnline

KARACHI: The Karachi Interbank Offered Rate (KIBOR) experienced a significant drop in response to the recently unveiled Consumer Price Index (CPI)-based inflation figures for February.

On a day-to-day basis, the six-month KIBOR decreased by 14 basis points (bps), settling at 21.59 per cent.

Likewise, the three- and nine-month rates saw a decline of 14 bps each, reaching 21.63 per cent and 21.44 per cent, respectively.

The one-year rate experienced a more substantial decrease, plummeting to 21.27 per cent after a reduction of 17 bps.

KIBOR, representing the equilibrium interest rate at which banks are inclined to lend money to other banks for a given tenor, exhibited a uniform decline across all tenors.

Analysts at Arif Habib Limited (AHL) attributed this trend to the release of inflation data for February by the Pakistan Bureau of Statistics (PBS) on Friday, indicating figures that were below market expectations.

According to PBS data, Pakistan’s headline inflation stood at 23.1 per cent year-on-year in February, a notable decrease from January’s 28.3 per cent.

The reading not only surpassed the government’s projection of 24.5–25.5 per cent but also strengthened the belief that the State Bank of Pakistan (SBP) may initiate monetary easing in the upcoming March 18 Monetary Policy Committee meeting.

Tahir Abbas, Head of Research at AHL, cautiously stated, “Too early to say, but with inflation receding, we can anticipate a monetary easing cycle commencing in March 2024.”

During its last meeting, the SBP’s Monetary Policy Committee maintained the status quo, retaining the key policy rate of 22 per cent.

The current drop in KIBOR is anticipated to bolster private sector credit off-take, offering potential economic stimulus, as highlighted by industry analysts.

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