A steady shilling prompted the Monetary Policy Committee to retain the Central Bank Rate (CBR) at 11.5 per cent.

Other factors that informed the decision were decline in Treasury bill and inter-bank lending rates, and inflation hovering within the targeted range.

Central Bank of Kenya (CBK) governor Dr. Patrick Njoroge, who chairs the Monetary Policy Committee (MPC), said monetary policy measures in place are appropriate to maintain market stability and anchor inflation expectations.
“The committee concluded that the monetary policy measures in place are appropriate to maintain market stability and anchor inflation expectations.  The MPC, therefore, decided to retain the CBR at 11.5 per cent”, he said.  The shilling is currently hovering at around Kshs.102 against the dollar from a high of Kshs.106 in September. “The fiscal measures taken by the National Treasury including the issuance of Kshs.61.2 billion syndicated loan, have eased pressure on government domestic borrowing and interest rates”.
In July, the committee raised the CBR from 10 per cent to 11.5 per cent and also adjusted the Kenya Bankers’ Reference Rate (KBRR) upwards from 8.54 per cent to 9.87 per cent, leading to a spike in commercial bank’s lending rates to tighten liquidity (money supply) in the market.
The CBR is also a component of the KBRR and determines the rate at which commercial banks borrow from CBK.
Also applying pressure on lending rates – that almost touched 28 per cent three weeks ago-was the government’s domestic borrowing which triggered a sharp rise of the 91-day T-bill rate that touched 22.4 per cent on October 15.
The 91-day T-bill rate is a component of the KBRR rate, which is used by banks to fix lending rates.  At last week’s auction (Thursday) the T-bill rate dipped to 9.65 per cent from 13.8 per cent the previous week.
Following the drastic drop of the T-bill rate, Dr. Njoroge urged banks to lower lending rates.  “The recent reduction in short-term interest rates should be transmitted to commercial lending rates”, “he said in a statement on Tuesday.
Last month, commercial banks gave borrowers 30-day notices indicating their intention to increase lending rates, with some increasing the cost of loans to as high as 27 per cent.