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Market News

Interbank rate in steep climb on liquidity crunch

Central Bank of Kenya
Central Bank of Kenya. FILE PHOTO | NMG 

The bank-to-bank lending rate climbed steadily last week to hit nearly six per cent, data from the Central Bank of Kenya (CBK) shows.

As of last Thursday, the interbank rate stood at 5.87 per cent compared to 4.72 per cent on the previous Thursday, meaning more than one percentage point upward change within a week.

Analysts monitoring the market explained that this was due to a liquidity crunch that had gripped the market since the week leading to the end of August.

“During the week, the average interbank rate rose (week ending August 30) from the previous week, pointing to declined liquidity in the money market.

The average interbank volumes declined by 19.1 per cent to Sh11.8 billion, from Sh14.6 billion recorded the previous week,” Cytonn Investments wrote in their market report.

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This was a deterioration from the favourable liquidity position for the better part of August when there were government payments that offset tax payments, the analysts said.

CBK data showed that the interbank rate stood at 3.67 per cent on the Friday, August 23, but this moved to 5.08 per cent the following Friday and to 5.87 per cent as of last Thursday.

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