The Monetary Policy committee will tomorrow have their monthly meeting where they decide how to deal with serious matters such as the the Central Bank rate, which is basically, the rate at which the central bank loans money to banks, and which should dictate the rate at which banks loan money to their clients. If the central bank lower the CBR then banks should lower their lending rates.
The Monetary committee will probably then go out and crunch numbers, starting with fact that with the month on month inflation has continued declining with a drop of 0.77% to 10.05%, and with the dollar having few high spurts to 86.2 but mainly staying in the 84.4 region, it has been a relatively stable month. They will go on to note that the economy growth is being stifled by the high CBR rate of 18% and everyone will expect them to lower it. We will wait with bated breath call our bank managers waiting for the CBR rate to go down so that we may borrow tonnes of money to splurge on a holiday somewhere in the Philippines with our little dog, Spot.
It really doesn’t matter what they say at the bottom of the report, unless of course they raise it. If they raise it all hell will break loose, if they decide to drop it or keep it constant you might as well tell spot to unpack his bags because the only Philippine he will meet is a Latin American clown who had a Philippine wife, retired to Kenya and does circus acts for free at children’s parties. This is because the truth is if they lower the rate it will have little to no effect on us at all. When questioned they will blame it on a volatile market or on ever shifting exchange rates; heck they could pin the blame on the lowered CBR rates saying that they are afraid it might breed instability.
The surprising thing though is that we will be shocked. Once again we will lament our policy makers, pray for the government to help us and do all sorts of inappropriate things like sending stern letters to the head of the CBK. Why though? We already see the same happening in the supple demand cycle of the ever escalating fuel prices. We see the same phenomenon in the increasing flour prices. The truth is prices in Kenya are always going up, and seldom do they find themselves going down. There will always be another reason to keep the prices where they are or take them higher.
And it makes perfect sense. The way to maximise your profit margin is to increase the top and lower the bottom. So why would I, as a businessman, reduce the price on my product especially when I know that my grip on the market is so vice like that they have no other option but to yield and buy my product. However, if businessmen make more money they expand, and want to make even more. When they expand they create more jobs. So I propose that the Monetary Committed lower the CBR rate as far as possible, in fact why don’t they just eliminate it completely? That way they will give the millionaires so much money that they will bail our country out of this economic bleurgh, either that or the markets will crash. Both ways it makes for a good story, and everyone loves a good story.