KIBOR falls after SBP cut policy rate

Following the State Bank of Pakistan’s (SBP) decision to reduce the interest rate by 1%, Karachi Interbank Offered Rate (KIBOR) rates for one-week to one-year tenors declined on Tuesday.

KIBOR represents the average interest rate at which banks are willing to lend money to other banks.

According to the data provided by Arif Habib Limited (AHL), on a day-on-day basis, the one-week KIBOR decreased by 91 basis points (bps) to 11.43%, the two-week tenor rate declined by 87bps to 11.44%, one-month KIBOR fall by 77bps to 11.47%, the three-month tenor rate was down by 75bps to 11.33%, six-month KIBOR decreased by 64bps to 11.44%.

The nine-month tenor rate clocked in at 11.53%, following a decrease of 73bps and 1-year tenor rate decreased by 75bps to 11.51%.

KIBOR surges after SBP keeps policy rate unchanged

On Monday, the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) on Monday cut the policy rate by 100 basis points (bps) to 11%, the cut came in above market expectations.

In its statement, the MPC noted that inflation declined sharply during March and April, mainly due to a reduction in administered electricity prices and a continued downtrend in food inflation.

“Core inflation also declined in April, primarily reflecting favourable base effects amidst moderate demand conditions.

“Overall, the MPC assessed that the inflation outlook has improved further relative to the previous assessment.

“At the same time, the Committee viewed that the heightened global uncertainty surrounding trade tariffs and geopolitical developments could pose challenges for the economy. In this backdrop, the MPC emphasized the importance of maintaining a measured monetary policy stance,” read the statement.

In the post monetary policy briefing session, SBP Governor apprised that key economic indicators have been improving and external sector sustainability is strengthening.

SBP’s FX reserves have improved on a YoY basis although in recent weeks decline has been noted amidst debt repayments.

Regarding the US tariff impositions, the central bank’s chief shared that the outcome remains uncertain and will depend on how the situation unfolds after the 90-day period ends.