Kenya’s central bank raised on Monday its discount window rate to 11.34 per cent from 6.25 per cent previously, a posting on its website showed, after it revised its overnight lending rules last week.Central Bank of Kenya said on Friday that commercial banks tapping the overnight window would be charged at a higher rate based on a formula that took into account the central bank rate (CBR), plus the previous day’s average interbank rate, minus the central bank’s rate of 6.25 per cent plus a penalty of three per centage points.The Central Bank of Kenya (CBK) has been using a range of short-term liquidity management tools since June to contain a sharp weakening of the shilling currency, that has lost more that 15 per cent against the dollar this year.
Half way through on Monday’s session, the shilling was little changed against the dollar, trading at 92.50/70 to at 0836 GMT from on Friday’s close of 92.55/75.
Traders said they had factored in an expectation that the rates would rise based on the formula released on Friday, but said the shilling was expected to continue gaining ground.
“Banks cannot afford to hold dollars in this environment and... it should lend support to the shilling ... and rein in inflation because banks will think twice before lending to customers,” said Ignatius Chicha, head of markets at Citibank.
From / Gulf Today