KARACHI - The Federal government and analysts' anticipation of decline in the discount rate and inflation to single digit may not be achieved due to ongoing political crisis, banking and money market sources told The Nation. The government officials and the analysts are eyeing discount rate into single digit by end-2009 while inflation is also being seen into double digit but very close to single digit level. Even it is being seemed that the anticipated economic repercussions of a week-old prevailing political havoc could not let the central bank to revise its current tight monetary policy stance by announcing a slightly cut in the interest rate in the forthcoming monetary policy, which is scheduled to be issued by end April 2009 with an objecting to pursue a damage control approach to dilute the impact of this dangerous anarchical state of affairs on economy. Market sources claimed that in an anticipation of a downward revision in the average CPI inflation rate and stable exchange rate position on the basis of improvement in macroeconomic variables as per the conditions approved by IMF, the Federal govt had decided to slash the discount rate by 600bps to 9pc by June 2009. However, banking experts have projected the interest rate to fall by 250bps to 12.5pc from 15pc for the end-quarter of FY09 on account of deceleration trend in the KIBOR of all tenors during Jan-Mar 2009. The Karachi Inter-bank offer rate for the one year tenure has shed by 202 basis points to 13.98pc during the three months of 2009. From Jan to March 11, the one-year KIBOR has declined by 2.2pc while the one-year KIBOR is likely to come down at below 13pc in the last quarter of FY09. This fall is attributed to liquidity improvement in the inter-bank and other market interest rate, taken place during the period under review. According to experts, due to the slowdown in the benchmark lending rate, financing cost of the industrial borrowers might decrease but the mark-up income of the banking sector is expected to squeeze a bit, posting decrease in the growth of sector spreads. As per SBP data on KIBOR rate, during first week of January 2009 the one-year KIBOR touched its peak and reached the highest level of 16 percent while since the middle of March this year it had started to reduce being landed at 13.98pc. Similarly maintaining this pace, as on March 11, 2009, KIBOR for the six months period had dropped to 12.46pc and for 3-month term it remained at 11.95pc. Meanwhile, a report of the SBP pointed out that the KIBOR of all tenors remained almost unmoved since the announcement of Interim Monetary Policy Measures until very recently when the 3-month and 6-month KIBOR recorded a slight decline. As on 30th January 2009, both the 3-month and the 6-month KIBOR of 14.5 and 15.2 percent are lower than their respective levels of 15.4 and 15.7 percent as on 12th November 2008; just before the increase in the policy discount rate. Earlier, during late October and start of November 2008, KIBOR had risen sharply due to tight market liquidity conditions and in anticipation of the policy rate hike. This indicates that the banks had already built in their expectations the need for such a hike in the wake of worsening macroecono-mic situation and high inflation in the economy. Similar to trends in the interbank interest rates, the retail rates also eased during the last two months of 2008. In Dec 2008, the weighted average lending and deposit rates, on incremental basis, stood at 14.3 and 8.9pc. As the decrease in lending rates was much sharper compared to a decline in the deposit rates, their spread contracted by 62 bps to 5.4 percent.