Central Bank of Kenya suspends the KBRR framework while it retains the current CBR

Yesterday on 30th January, 2017, the Monetary Policy Committee (MPC) met to review the outcome of its previous policy decisions and recent economic developments. The Monetary Policy Committee decided to retain the Central Bank Rate (CBR) at 10.0 percent in order to anchor inflation expectations. Inflation is expected to remain within the Government target range of between 2.5 and 7 percent in the short term.

According to the MPC, the available data was inconclusive for assessing the impact of the recent capping of interest rates. As such, the CBK will continue to closely monitor and assess the impact of the interest rate caps. For the time being, banks are reviewing their business models. This is aimed at enhancing the resilience of their operations in the new environment.

The Bank also said that its foreign exchange reserves currently stand at $6.936 billion equivalent to 4.5 months of import cover, which together with the Precautionary Arrangements with the International Monetary Fund (IMF) continue to provide an adequate buffer against short-term shocks.

“The resilience of the economy, and international confidence in the country’s macroeconomic policies was underscored by the successful completion of the first review of Kenya’s economic programme on January 25, 2017, by the IMF.”

-MPC Press release

The Committee also noted increased uncertainties with regard to the prevailing drought conditions, risks in the global markets, future policies under the new U.S. administration and the outcome of the Brexit negotiations.

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“The Committee will continue to closely monitor developments in the domestic and global economies, and stands ready to take additional measures as necessary.

The MPC considered the Kenya Bankers Reference Rate (KBRR) which was introduced to provide a transparent credit pricing framework. In view of the adoption of the new law capping interest rates the CBK decided to suspend the KBRR framework.”

-MPC Press release

The Kenya Bankers Reference Rate (KBRR) was introduced in 2014 as a base rate to calculate the cost of credit.

Mr. Felix
A Math Nerd and a Computer Geek. Currently a Windows 10 Insider. Interested in AI, big data and AR/VR. Takes a keen interest in developments in the tech, business and social media spheres.

Mr. Felix

A Math Nerd and a Computer Geek. Currently a Windows 10 Insider. Interested in AI, big data and AR/VR. Takes a keen interest in developments in the tech, business and social media spheres.

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