April 12, 2007	Thursday	Rabi-ul-Awwal 23, 1428

KARACHI, April 11: The State Bank again raised the cut-off yields on six- and 12-month treasury bills in an auction here on Wednesday. The yield on 6-month papers was moved up to 8.90pc from 8.85pc and on 12-month bills from 9.05pc to 9.07pc.

On March 28, the SBP had raised the cut-off yields on all three maturities of T-bills.

The SBP picked up Rs1.960bn for three-month, Rs18.674 billion for six-month and Rs31.459bn for 12-month papers. It received a total bids of Rs64 billion and accepted offers of Rs52bn.

Pressure is mounting on the State Bank to control rising monetary growth which is causing inflation but analysts and bankers see no significant change in the tight monetary policy.

A banker said it was a further tightening of monetary policy as the higher cut-off yields sending message to the market that interest rates were moving up slowly.

He said the interest rates had been an effective tool to control the monetary growth but the recent ‘unwanted’ monetary growth had created difficult situation for the central bank.

He said that further tightening would be counterproductive as the cost of borrowing would again create inflationary pressure.

However, the SBP holds the huge foreign inflows responsible for excess supply of money into the system causing inflationary pressure.