Monday, August 15, 2011

Kenyan Central Bank Sets Discount Window Rate at 11.34%

The Central Bank of Kenya set its interest rate for discount window lending at 11.34% following the implementation of new interest rate calculation rules.  The Bank said in a note last week that the CBK discount window interest rate would be the CBR (Central Bank Rate) + previous day's average interbank rate minus the CBR + a penalty 3 percentage points.  The Bank noted: "More recently, the foreign exchange market has once more been under severe pressure.  Consequently, the link between interest rates and exchange rates requires further elaboration in the Prudential Guidelines which govern liquidity for commercial banks".

Recently the Bank increased, and subsequently decreased the discount window rate by 75 basis points to 6.25%, while holding the benchmark lending rate unchanged at 6.25% at its July meeting.  The Kenyan central bank last increased the benchmark lending rate by 25 basis points in May this year.  Kenya experienced inflation of 14.49% in June, up from 12.95% in May, compared to 12.05% in April and 9.19% in March, according to inflation data from the Kenya National Bureau of Statistics.  The Central Bank of Kenya has an inflation target of 5 percent.


Post a Comment