SBP injects PKR 1.18tr into banks at higher return.

Pakistan's central bank cleared the smoke on Tuesday as it injected liquidity at a higher interest rate into commercial banks ahead of its monetary policy review on July 7, signalling it would increase its key policy rate this week.

The State Bank of Pakistan (SBP) supplied Rs1.18 trillion to commercial banks at an increased interest rate of 13.97 percent for a longer period of 73 days through the open market operation (OMO).

It had left the financial markets surprised a day ago (Monday) when it sought commercial banks demand for liquidity, but rejected all bids worth Rs2 trillion.

The Monday's exercise had confused the market, as it gave mixed signals about the uptick in key policy rate on July 7. But Tuesday's 73-day injection "at a higher interest rate" suggested a hike in the policy rate when...