Kibor starts inching up as hopes for rate cut fade

The benchmark Karachi Interbank Offered Rate (Kibor) has again started crawling up as chances of a reduction in the key interest rate by the State Bank of Pakistan in its monetary policy review on Jan 29 seem unlikely due to elevated inflationary pressures. Kibor is a market-determined average interest rate at which banks lend to one another in the interbank market. It has stayed higher during the current fiscal year as its 6-month tenor reached as high as 25pc in September 2023, much higher than the SBP’s policy rate of 22pc. However, after the central bank’s firm view that inflation would start easing in the second half of 2023-24, the Kibor started declining. However, the annual Consumer Price Index-based inflation kept increasing as it reached 29.23pc in November and further to 29.7pc in December. “During a week the 6-month Kibor tenor increased by 14 basis points from 20.69 to 20.83pc on Tuesday,” said S.S. Iqbal, a money market expert and dealer. He said there was no hope for a cut in the interest rate and the market started moving in the right direction with higher Kibor.