News

cbkThe shilling has lost ground as banks that had sold dollars expecting the Central Bank of Kenya (CBK) would raise its benchmark lending rate covered short positions when the bank left the rate unchanged.
The bank’s Monetary Policy Committee (MPC) surprised the markets by holding the rates at 11.50 percent late on Wednesday, after trading on the shilling had closed, saying it did so to allow recent tightening to fully take effect.


At 11.09 am, Commercial banks quoted the shilling at 101.10/20 to the dollar, verses Wednesdays close of 100.75/85. Overnight interest rates are way above 20 percent. The weighted average inter-bank lending rate rose to 21.27 percent on Wednesday from 20.4 percent a day earlier, and hit a high of 23 percent.
Tight liquidity makes it costly to hold dollars, which lends support to the shilling. The CBK said it planned to mop up Sh12 billion from the money markets yesterday, which could further tighten local currency liquidity.
The shilling has been declining this year after a surge in imports and a slowdown in hard currency earnings caused by low tourist arrivals due to frequent attacks by militants from a neighbouring country.
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