MPC cut rates by 50bps to 10.75%.

[Denis Young]

As expected, monetary policy easing is in effect. With inflation currently under control, it is time to loosen the belt and allow cheaper credit to flow into the economy.

As usual, banks will take their time to reduce their interest rates in line with CBK hence the strong arm tactics.

Things are looking up on a macro level.

 

[zapp_brannigan]

As usual, banks will take their time to reduce their interest rates in line with CBK hence the strong arm tactics.

Is it possible that the banks are not ready to lend money since from where they "sit" things are not as rosy as CBK is putting it?
Not being negative just thinking outside the box.

 

[Denis Young]

Is it possible that the banks are not ready to lend money since from where they "sit" things are not as rosy as CBK is putting it?
Not being negative just thinking outside the box.

That is not how interest rate work. Banks get loans from CBK and then loan to you. So, if CBK is giving them cheaper credit, then it follows that they should give cheaper credit to you.

But banks are greedy. They were quick to raise rates over the last 2 years when CBK raised rates but very slow to cut when CBK begun cutting hence the enforcement stick.

With interest rates on T.Bills and Bonds reducing, automatically banks will have to start lending the common man because that is where the higher yields will be.

 

[zapp_brannigan]

That is not how interest rate work. Banks get loans from CBK and then loan to you. So, if CBK is giving them cheaper credit, then it follows that they should give cheaper credit to you.

But banks are greedy. They were quick to raise rates over the last 2 years when CBK raised rates but very slow to cut when CBK begun cutting hence the enforcement stick.

With interest rates on T.Bills and Bonds reducing, automatically banks will have to start lending the common man because that is where the higher yields will be.

Understood

 

[Young_Turk]

That is not how interest rate work. Banks get loans from CBK and then loan to you. So, if CBK is giving them cheaper credit, then it follows that they should give cheaper credit to you.

But banks are greedy. They were quick to raise rates over the last 2 years when CBK raised rates but very slow to cut when CBK begun cutting hence the enforcement stick.

With interest rates on T.Bills and Bonds reducing, automatically banks will have to start lending the common man because that is where the higher yields will be.

All of this is very wrong and misleading.

Banks only take loans from CBK as a lender of last resort, during times of crisis, to prevent from failing.

Source: https://www.centralbank.go.ke/banki...ial Banks,industry in pricing interbank loans

Banking Services to Commercial Banks and Microfinance Banks

The Central Bank provides the following services to Commercial Banks:

1. Maintains accounts to enable commercial banks to effect and receive payments from other commercial banks, the government and other external financial institutions in Kenya shillings and foreign currency.
2. Provides a Real Time Gross Settlement (RTGS) system to enable commercial banks settle their interbank obligations on a real time basis.
3. Provides liquidity through the Intra-day Liquidity Facility (ILF) and the Overnight Loan Facility. These loans are secured by government securities.
4. Hosts the Kenya Bankers Association’s Automated Clearing House (ACH).
5. Facilitates completion of commercial banks and microfinance banks external audits by providing confirmation of balances in their clearing accounts and cash reserve ratio accounts in our books to their external auditors.
6. Provision of the Daily Interbank Money Market Report, this is a summary of daily borrowings among commercial banks in the interbank market and guides the industry in pricing interbank loans.

With interest rates on T.Bills and Bonds reducing

I don't know where you are getting this pseudo economic information from.

Kenya 10-Year Government Bond Yield - Quote - Chart - Historical Data - News

Kenya 10Y Bond Yield was 14.70 percent on Thursday February 6, according to over-the-counter interbank yield quotes for this government bond maturity. Kenya 10-Year Government Bond Yield - values, historical data, forecasts and news - updated on February of 2025.

tradingeconomics.com

This is why Kaongo is failing. Because of apologists like you.

 

[shocks]

That is not how interest rate work. Banks get loans from CBK and then loan to you. So, if CBK is giving them cheaper credit, then it follows that they should give cheaper credit to you.

Wewe wacha, CBK is a lender of last resort to banks, hii ni wakati kimeumana so seriously bank haina liquidity then cbk steps in so as not to cause a panic.
How it works is cbk ensures interest rates on treasuries fall (either thru quantitative easing or government reducing the amt it borrows). Further to that kama sahii they cut the cash reserve ratio, this is the minimum percentage of deposits a bank needs to have in cash. This ensures banks have more cash available coz. lending to government makes no sense which forces banks to lend to customers if they are to remain in business.

 

[Denis Young]

Wewe wacha, CBK is a lender of last resort to banks, hii ni wakati kimeumana so seriously bank haina liquidity then cbk steps in so as not to cause a panic.
How it works is cbk ensures interest rates on treasuries fall (either thru quantitative easing or government reducing the amt it borrows). Further to that kama sahii they cut the cash reserve ratio, this is the minimum percentage of deposits a bank needs to have in cash. This ensures banks have more cash available coz. lending to government makes no sense which forces banks to lend to customers if they are to remain in business.

Lender of last resort is just one of the functions of CBK. It is a tool used to prevent the collapse of a bank. It is basically used in an emergency situation. How about the regular daily liquidity? Google repurchase agreements and standing lending facilities.

Cutting the CRR doesn't automatically force banks to lend to customers. While they will be more liquid, they can still lend to the government. That is why you have to make it less appealing by cutting rates. Eventually, if the rates drop to a point it is more practical to lend to customers, then banks will do so. If we can achieve pre-covid or near pre-covid CBR without raising inflation the economy will be booming. But we are a long way from that.

 

[Young_Turk]

Lender of last resort is just one of the functions of CBK. It is a tool used to prevent the collapse of a bank. It is basically used in an emergency situation. How about the regular daily liquidity? Google repurchase agreements and standing lending facilities.

Cutting the CRR doesn't automatically force banks to lend to customers. While they will be more liquid, they can still lend to the government. That is why you have to make it less appealing by cutting rates. Eventually, if the rates drop to a point it is more practical to lend to customers, then banks will do so. If we can achieve pre-covid or near pre-covid CBR without raising inflation the economy will be booming. But we are a long way from that.

I weep for my country.

If these are the thoughts of the chosen in Kenya Kwanza.