MONEY MARKET ANALYSIS
Interbank lending picked up pace during the week, with average traded volumes surging 176.1% to KES17.28bn from KES6.26bn the previous week, mirroring a 135.7% jump in the number of transactions. Meanwhile, the average interbank rate edged down slightly to 10.28% from 10.68%, as the effects of the Central Bank Rate (CBR) cut earlier in the week begin to kick in. The table below summarises the market liquidity indicators:
Meanwhile, the CBK mopped up KES58.23bn in liquidity—marking a further 50.7% drop from the previous week’s KES118.19bn. However, toward the tail end of the week, the authorities pivoted to a liquidity injection exercise, aiming to steer the interbank rate to within the bounds of the newly adjusted corridor. See below a visual chart;
Following the MPC meeting, the interbank rate corridor now stands at 9.25%–10.75%, after the width was narrowed from ±150bps to ±75bps around the CBR. While the floor holds steady, the ceiling has been trimmed down from 12.25%, signalling a more focused approach to rate guidance. See the chart below;
