KARACHI, Sept 9: The State Bank on Friday mopped up Rs10.6 billion from the inter-bank market through a six-day repo sale of treasury bills at 7.90 per cent, a statement issued by the central bank said. This was the third consecutive open market operation by the SBP aimed at keeping the liquidity levels within limits. Earlier, on Wednesday and Thursday, the SBP had siphoned off Rs6bn and Rs9.9bn through an eight-day and one-week repo also at 7.90pc.

Lately, the central bank has been using OMOs as an effective tool of containing liquidity in the inter-bank market in its fight against inflation.

The three consecutive OMOs helped stabilize the overnight inter-bank market rates around 7.0-7.5 per cent and bankers say that the central bank would not mind making more OMOs to soak further liquidity from the market and stabilize interest rates.

Inflation during the last fiscal year had risen by 9.28 per cent and though the government has made a vow to keep it at eight per cent during the current fiscal year, chances are that it would rise faster.

The Asian Development Bank said on Thursday inflation might rise by 8.5 per cent in fiscal year July-June 2005-06 and that the GDP growth estimate of seven per cent may be elusive. It said the GDP might grow by 6.5pc.

During the last fiscal year, inflation had risen by 9.28 per cent despite a gradual and then aggressive tightening of interest rates by the central bank. During this fiscal year, the central bank looks set to tighten interest rates further but in a measured way so as to avoid its negative impact on the GDP growth.