KIBOR drops after soft inflation numbers

March 04, 2024 (MLN): The Karachi Interbank Offered Rate (KIBOR) dropped sharply on Monday following the release of soft February inflation numbers.

Consumer Price Index (CPI)-based inflation rose 23.06% in February from a year earlier, the slowest pace in over 20 months.

The benchmark 6-month Karachi Interbank Bid and Offer rates dropped by 10 basis points (bps) to 21.34% and 21.59%.

The rates dropped across all tenors, with the one-year KIBOR seeing the maximum decline of 11 bps to 20.77% and 21.27%.

The inflation slowdown has renewed bets for a sooner than previously expected rate cut by the State Bank of Pakistan, which has kept the policy rate at 22% since June 2023.

The central bank is scheduled to meet on March 18, 2024, to announce its next decision. The real interest rates are largely expected to turn positive in March for the first time in over three years.

“Post release of the inflation numbers for Feb’24 by the PBS, which were below market expectation at 23.1%, KIBOR saw a decline across all tenors on a DoD basis,” said Arif Habib Limited.

KIBOR is used as a benchmark for corporate lending rates. It is a market-determined average interest rate at which banks lend to one another in the interbank market.

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