KARACHI: Pakistan’s interbank lending rates climbed on Tuesday following the State Bank of Pakistan’s (SBP) decision to maintain its key interest rate at 12 per cent.

The Karachi Interbank Offered Rate (Kibor), representing the average rate at which banks lend to each other, saw increases across various tenors. Data from Arif Habib Limited (AHL) showed the one-week Kibor rising by 34 basis points (bps) to 12.41 per cent, while the two-week tenor jumped by 37bps to 12.4 per cent. The one-month Kibor increased by 41bps to 12.35 per cent, and the three-month rate rose by 19bps to 12.05 per cent. Six-month Kibor saw a 22bps increase to 12 per cent.

The nine-month tenor rate reached 12.15 per cent, up by 19bps, and the one-year tenor increased by 16bps to 12.13 per cent. The SBP’s decision to hold the policy rate steady, announced on Monday, surprised market participants who had anticipated a 50bps cut, driven by lower February inflation figures.

In its statement, the Monetary Policy Committee (MPC) cited the “steep fall in prices of perishable food items” and “sufficient stocks of major non-perishable items” as factors contributing to overall food price moderation.

Additionally, “energy prices continued to benefit from the moderation in global oil prices, stable exchange rate and favourable base effect.” However, the MPC noted that “core inflation is still at an elevated level and is proving stickier than anticipated”.

The central bank projects inflation to decline further before gradually rising and stabilising within the target range of 5-7 per cent. The MPC cautioned that the inflation outlook remains vulnerable to risks, including food price volatility, energy price adjustments, revenue measures, protectionist policies in major economies and global commodity price uncertainty.