Kenya's central bank cuts key rate to 8.5%
According to a statement of the central bank, its Monetary Policy Advisory Committee considered the 10% charged on the CBR rate to be "out of line with the market outcomes of interbank, repo and treasury bills".
The Central Bank of Kenya first introduced to the CBR in 2006 as the rate it lends money to commercial banks as a last resort. Since then the central bank has tried to promote it as the benchmark for monetary policy.
Banks normally change their own lending rates after changes to the 91-day treasury bill yield, but the central bank wants the CBR rate to "appropriately serve as both well-priced liquidity support, lending facility and an effective instrument for signalling the stance of monetary policy."
The central bank said that the new rate was still high enough to deter banks from frequent recourse and possible misuse.
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