The Central Bank of Kenya (CBK) has doubled down on its efforts to bring down high interest rates on commercial bank loans by implementing a triple cut on its key benchmark lending rate, the interbank interest rate corridor and the penalty charged to banks for accessing its emergency borrowing window.
The CBK's monetary policy committee has cut the central bank rate (CBR) to its lowest level in almost two years, reducing the benchmark from 10.75 percent to 10 percent, signalling its expectation of lower domestic interest rates as it pushes for private sector credit growth.
“The committee concluded that there was scope for a further easing of the monetary policy stance to stimulate lending by banks to the private sector and support economic activity, while ensuring exchange rate stability,” CBK said in a statement on Tuesday.
The CBK has also squeezed interest rates charged on borrowing between banks in an attempt to curb the high cost of funds for lenders, adjusting the width of the interest rate corridor from the current 1.5 percentage points around the CBR to 0.75 percent.
The interest rate charged on the CBK discount window - an overnight facility through which banks can access emergency funding from the apex bank - has also been slashed from three percentage points above the CBR to 0.75 percent.
This means that both the interbank lending rates and the discount window will be capped at 10.75 percent.
