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CBK should further drop its benchmark rate from 10.5% to 5%

By DrNjenga Solomon | September 1st 2016

If Central Bank of Kenya accepts to lower its lending benchmark rate commonly referred to as Central Bank Rate (CBR) from its current 10.5 to 5%, banks will consequently lower their interest rate to 9% and this will push Kenya’s profile to the topmost Countries in the World to cap interest rates on a single digit! Indeed, by the fall of interest rates in Kenya, Central Bank of Kenya must also lower it benchmark rate so that the benefit intended can be felt by the vulnerable Kenyans and if this happens, the bank interest rates will definitely come down further to 9% or there-about, making Kenya among the topmost countries in the World with a single digit interest rate. This will definitely make credit cheaper and more accessible to vulnerable Kenyans who have been on the exploitation spree by rogue banks since 1963.

 This argument of lowering Central Bank Rate (CBR) is informed by the decline of inflation in Kenya plus the decline too Treasury bill rates in the recent past.  This to me is the greatest gift Uhuru Muigai Kenyatta can give to his vulnerable Kenyans. Indeed, there is consensus among Kenyans and even among banks that CBK interest rates are too high and must also come down. The elusive question among vulnerable Kenyans currently is: why are CBK’s interest rates still at 10.5% and who determines CBK interest rates?


While the growth of credit to Kenyans and private sector has remained at double-digit levels year-on-year for more than a decade, high Central Bank Rate (CBR) has been cited as the single biggest reason for a good number of prospective borrowers staying away from the market. Even with the current lowering of banks loans to 14.5%, Kenyans still feels there is a need to lower it further and this can only be down by CBK - the only statutory body that can renegotiate the same so that Kenyans can be free and free indeed.

 We (Kenyans) therefore urge the Monetary Policy Committee (MPC) of the Central Bank of Kenya to consider lowering CBR so as to help more Kenyan’s dream come to reality. MPC should actually be informed by the falling of inflation in Kenya which is now within the Government’s target range. Indeed, while they continuing to anchor inflation expectations, there is need for a change to monetary policy so as to ease further the burden of loans in Kenya.


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