Central Bank of Kenya
|Central Bank of Kenya|
|Key People||Governor Njuguna S. Ndung'u|
The Central Bank of Kenya (CBK) is charged with ensuring price stability and an efficient national payments system through the Kenyan shilling but has some autonomy in setting Kenya's monetary policy. The CBK must consult with the national government on "important" issues of fiscal and monetary policy. The CBK recently continued cutting interest rates and lowering commercial banks' capital requirements and predicted Kenya's double-digit inflation rate will fall in 2009.
The CBK was established in 1966 by the Central Bank of Kenya Act and amended in 1997 to allow the central bank greater autonomy in setting monetary policy such as interest rates. However, under the same amendment the CBK must also advise the national government on fiscal and monetary matters with possible "important ramifications" on monetary policy.
The CBK is governed by a board of eight directors including the governor and deputy governor, who sit as chairman and deputy, plus the Permanent Secretary to the Treasury in a non-voting role and five other non-executive directors appointed by the president.
Sells 91-day and 182-day Treasury bills (T-bills), Treasury bonds (T-bonds) with yearly maturities from one year to 12 years, plus 15-year and 20-year maturity T-bonds. CBK also issues repo bills with maturities of three days, one weeks, two weeks, one month, two months and three months. Also issues and ensures efficient circulation of the national currency, the Kenyan shilling.
CBK Governor Njuguna Ndung’u was appointed in March 2007 from his previous position as Director of Training at the African Economic Research Consortium (AERC). Ndung'u is also an associate professor of economics at the University of Nairobi and has worked at the Southern Africa Regional Office of Canada's International Development Research Centre (IDRC).
The CBK will have greater flexibility to cut interest rates even further once it reduces the weighting of food and energy prices on the measurement of Kenya's consumer price index, which will likely cause inflation to fall, according to recent press reports. The CBK most recently cut interest rates by 50 basis points to 8.5% on December 1, 2008 and lowered cash reserve requirements for commercial banks from 6% to 5% of total liabilities. Other reports note that the CBK also recently reported a significant annual fall in Kenya's forex reserves to January 15, 2009, underscoring the country's vulnerability to further global financial shocks.