Karachi: A sharp rise in global oil prices amid escalating tensions in the Middle East has heightened inflationary concerns, prompting expectations that the State Bank of Pakistan (SBP) may increase its policy rate in the upcoming monetary policy meeting scheduled for April 27.
Financial analysts point to a significant jump in treasury bill (T-bill) yields in the latest auction as a clear signal of tightening monetary conditions. Yields rose by up to 100 basis points, creating room for a potential increase in the benchmark interest rate, which currently stands at 10.5 percent.
In the auction, one-month T-bill yields climbed by 98.4 basis points to 11.47 percent, three-month yields rose by 100 basis points to 11.5 percent, six-month yields increased by 76 basis points to 11.5 percent, and 12-month yields went up by 50.7 basis points to 11.5 percent.
Earlier expectations of a rate cut in March were shelved as geopolitical tensions intensified, pushing oil prices to between $110 and $130 per barrel. The volatility in global energy markets has raised fears of a new wave of inflation, forcing the central bank to maintain a cautious stance.
The government raised over Rs1 trillion through the T-bill auction, reflecting growing fiscal needs. Total bids reached Rs1.358 trillion, indicating that banks continued to channel liquidity into government securities amid limited private-sector lending opportunities.
Rising oil prices, coupled with higher shipping and insurance costs due to regional uncertainty, have dampened investor confidence. Analysts warn that a tighter monetary policy could further strain trade and industry, already burdened by increasing fuel costs and a challenging economic environment.
Story by Shahid Iqbal
