The Karachi Interbank Offered Rate (Kibor) has started to decrease in response to low inflation and speculation of an upcoming cut in interest rates. There was a noticeable drop in Kibor over the weekend, with the one-year term dropping by 11 basis points to 21.27pc. Other tenors also experienced decreases, indicating a potential interest rate cut in the next monetary policy review.
The recent decline in headline inflation suggests a future trend of lower inflation, which could lead to a reduction in interest rates. However, the cost of food items during Ramazan may impact the Consumer Price Index for March.
The State Bank of Pakistan will announce the monetary policy by the end of the month, and market participants are eagerly awaiting any developments. The trade and industry sectors are concerned about high interest rates, which have increased production costs, inflation, and decreased consumer purchasing power. A decline in consumption could negatively impact economic growth.
The decrease in inflation from January to February led to the decline in Kibor, signaling a potential interest rate cut. However, uncertainties remain regarding new loans from the IMF and conditions for economic consolidation. Experts are unsure about the future trends of CPI and the policy interest rate, as previous speculations were altered by changes in inflation figures before the last monetary policy announcement.