CBK Cuts Rates In Technical Adjustment

June 2007 | Market Strategy

The Central Bank of Kenya has cut its Central Bank Rate (CBR) to 8.5% from 10.0% today. We do not expect the move to have a significant impact on domestic liquidity conditions, as the rate change was more technical in nature, though it is a signal that the CBK has a sanguine stance vis-à-vis inflation. We expect short-dated rates to ease mildly going forward, in response to the move and muted price pressures. Moreover, as a result of this rate cut, we expect the CBR to become a more effective monetary policy tool, more closely watched by market participants as a benchmark rate. However, greater fiscal laxity from the government ahead of the December elections could prove to be source of inflation further down the road.

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