The directive by the Central Bank to commercial banks to stop a planned interest rate increase is welcome at this time when citizens seem to have been left to suffer on their own.
Appearing before the Finance Committee of the National Assembly, the CBK governor, Patrick Njoroge, said he had met with the bankers and asked them to withdraw notices sent to customers on the rates increase.
The responsible ones, Dr Njoroge added, are expected to even offer a cut on interest given that the market dynamics that had pushed up the rates have since changed.
In the months to mid-October, the government’s appetite for debt pushed interest rates on short term borrowing paper to a high of 22 per cent, with the rate at which banks borrow from each other hitting 25.84 per cent.
However, in the past two weeks the trend has changed, with the interbank rate falling to 9.3 per cent and the 91-day Treasury bill rate dropping to 13.8 per cent, prompting the CBK governor to take the unprecedented decision to order the freeze on rates.
This is a welcome decision in an industry that is quick to hike rates but slow to lower them even when they hurt the economy.
SOURCE: DAILY NATION