Market News

CBK mops up Sh56bn to curb market liquidity

Central Bank of Kenya
Central Bank of Kenya head office in Nairobi. FILE PHOTO | NMG 

The Central Bank of Kenya (CBK) Monday mopped up Sh56.2 billion from the money market through repurchasing agreements (repos), signalling expectations of a large injection of shillings into the market.

The regulator explained to market participants that it was looking ensure that the financial system remained on the monetary policy path set by the Monetary Policy Committee (MPC).

“The analysis by the CBK today shows excess liquidity in the market. In order to remain within the set monetary policy path by the MPC, the CBK is in the market to mop up Sh70 billion in seven-days repo today September 16 2019. Interest is determined competitively with the ceiling at the CBR (Central Bank Rate),” said the CBK in detailing why it had floated the huge amount in repos.

The CBK went on to accept all the Sh56.2 billion worth of bids that were put in by commercial banks.

The CBR is currently at 9.00 per cent and this represents the maximum that the CBK is obligated to pay to banks when it seeks to mop cash they are holding. With the latest floating of the repo, the CBK announced a weighted average rate of 8.971 per cent.


A market player said that the CBK could either be expecting significant amounts of redemptions in government securities or that there was a huge payments coming into the market shortly and therefore the need for pre-emptive action.

The source, who could only speak candidly on condition of anonymity, said that there was a chance that the expected cash would have impact on the foreign exchange, but he added that the CBK was probably not unduly worried about people using the liquidity to destabilise the forex market.