According the Central Bank of Kenya’s (CBK) website as at the close of business on Thursday, the various interest rates in the economy are as follows:

To the average Kenyan what do all these mean?

Inflation, as we’ve discussed before, is the gradual increase in the level of prices. Therefore the inflation rate of 13.06% means that upon comparison, the price of goods today is 13.06% higher than the price of the same goods during the base year.

Central Bank Rate is the cost of borrowing from the Central Bank of Kenya. It is incurred by commercial banks and its level affects the interest rate at which the banks advance loans to the general public. Therefore the higher the CBR the higher the interest you’ll probably pay on a loan from a commercial bank.

T-Bill rate is the interest investors will earn upon investing in the respective Treasury bills. This rate usually reflects the expectations that investors have concerning the economy. If the rate is high this means that the government is trying to attract investors and mop up excess money in the economy. This means that inflation is on the rise or has risen and consequently the T-Bill rate is high to attract investors.

Interbank Rate is the cost that commercial banks incur when they borrow from each other. The higher the rate the lower the money supply available for lending within banks and consequently the higher the interest rate on loans advanced to the public.

Clearly, all these rates are an indication of sorts of the economic environment the country seems to be in. It is necessary for investors to have an understanding of the meaning of these rates and what to expect when they rise or fall.