KIBOR climbs as SBP raises policy rate to 12%

October 29, 2026 (MLN): The Karachi Interbank Offered Rates (KIBOR) moved higher on Thursday, with the sharpest increases in the three-month to one-year tenors, days after the State Bank of Pakistan (SBP) raised the policy rate by 50 basis points to 12%.

The three-month KIBOR rose 21 basis points (bps) day-on-day to 12.19% (bid) and 12.44% (ask). The six-month rate gained 18bps to 12.39% (bid) and 12.64% (ask), while the nine-month rate rose 17bps to 12.45% (bid) and 12.95% (ask). The one-year rate climbed 23bps to 12.54% (bid) and 13.04% (ask).

Shorter tenors saw only marginal changes. The one-week rate edged up 1bp to 11.86% (bid) and 12.36% (ask), the two-week rate gained 3bps to 11.88% (bid) and 12.38% (ask), and the one-month rate rose 3bps to 11.90% (bid) and 12.40% (ask).

Compared with October 27, the three-month bid rate is up 23bps from 11.96%, the six-month rate is up 19bps from 12.20%, the nine-month rate is up 20bps from 12.25%, and the one-year rate is up 25bps from 12.29%.

The Monetary Policy Committee (MPC) said the hike was in line with market expectations and necessary to keep inflation expectations anchored, contain second-round effects of the supply shock and bring inflation within the 5-7% target range. It described the move as important to keep the real policy rate adequately positive on a forward-looking basis.

Headline inflation stood at 10.3% year-on-year in September, higher than the MPC had expected, while core inflation held steady at around 8.4%. The committee identified the re-escalation of the Middle East conflict and domestic wheat supply frictions as the two main factors keeping prices elevated, with both expected to persist over the coming months.

On the external side, SBP's reserves held steady at around $21.5bn, equal to three months of import cover. SBP Governor Jameel Ahmed said reserves are projected to reach $23bn by December 2026 and $25bn by June 2027. The MPC expects real GDP growth to stay within the range of 3.5-4.5% in FY27.

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