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10 consecutive cuts later, how is Kenya's output gap evolving & is it still deep in the red? That was my question to Governor, Dr. Kamau Thugge, during today's Monetary Policy Committee briefing following yesterday's 'hat trick' cut (see quoted tweet). The Governor makes a few important points: ·...

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Julians Amboko

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10,642 views • 6 months ago •via X (Twitter)

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This is the first time the Central Bank of Kenya, the Governor no less, has spoken openly about the contentious & much debated Sec44 of the Banking Act. · Dr. Kamau Thugge says that as far as the Central Bank is concerned, there is no need for banks seeking approval from the CS National Treasury for interest rate adjustments · The stance taken by the Governor, & the Central Bank by extension, goes against the Supreme Court judgement on the matter Stanbic Bank Kenya Limited vs Santowels Limited which affirmed Sec44 of the Banking Act which dictates that no institution can increase its rate of banking or other charges without the National Treasury CS's approval · It is also important to note that the Governor emphasises that monetary policy adjustment should be transmitted IMMEDIATELY by banks. Four months ago, the question of immediate transmission was the cause of a storm between banks & their regulator (see quoted tweet)
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This is the first time the Central Bank of Kenya, the Governor no less, has spoken openly about the contentious & much debated Sec44 of the Banking Act. · Dr. Kamau Thugge says that as far as the Central Bank is concerned, there is no need for banks seeking approval from the CS National Treasury for interest rate adjustments · The stance taken by the Governor, & the Central Bank by extension, goes against the Supreme Court judgement on the matter Stanbic Bank Kenya Limited vs Santowels Limited which affirmed Sec44 of the Banking Act which dictates that no institution can increase its rate of banking or other charges without the National Treasury CS's approval · It is also important to note that the Governor emphasises that monetary policy adjustment should be transmitted IMMEDIATELY by banks. Four months ago, the question of immediate transmission was the cause of a storm between banks & their regulator (see quoted tweet)

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Dr Kamau Thugge giving some colour to the decision taken in yesterday's Monetary Policy Committee meeting. · The adjustment of the Discount Window from 300.0bps to 75.0bps above the benchmark is a crucial move · This means that the Discount Window rate is now aligned with the upper limit of the interest rate corridor given that the width of the Interbank Rate corridor has been adjusted from +/- 150.0bps to +/- 75.0bps around the benchmark · Essentially, the Central Bank has addressed the misalignment of having a corridor in place while the Discount Window rate trends above it · The Central Bank is expected to conclude the on-site inspection of banks who are not transmitting the lower yields to end consumers by June 2025 after which banks found to be in contravention will be subject to fines

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