Money and equity markets react positively to lowered base lending rate

Kenya’s money market remained liquid during the week ending August 14 after the Central Bank’s Monetary Policy Committee (MPC) further cut the base-lending rate by 25 basis points to 9.5 per cent.

The banking regulator noted that overall inflation was expected to remain below the midpoint of the 5±2.5 per cent target range in the near term, and growth in commercial banks’ lending to the private sector continued to improve in line with declining lending rates, albeit at a slow pace.

Open market operations remained active with commercial banks’ excess reserves standing at Sh7.6 billion to the 3.25 per cent cash reserves requirement.

The average interbank rate was at 9.48 per cent compared to 9.6 per cent on August 7. During the week, the average number of interbank deals increased to 23 from 16 the previous week; similarly, the average value traded increased to Sh10.2 billion from Sh9 billion in the previous week.

At the Nairobi Securities Exchange, the NASI, NSE 25 and NSE 20 share price indices increased by 2.11 per cent, 2.9 per cent and 4.52 per cent, respectively.

Market capitalisation also increased by 2.11 per cent, with investors’ paper wealth rising by Sh53 billion, while equity turnover and total shares traded decreased by 15.65 per cent and 2.48 per cent, respectively.

Banking stocks dominated the market, with Equity Bank, KCB Group and Cooperative Bank Group joining Safaricom, Kenya Re and KenGen as top movers for the week.

Even so, Car & General maintained its market dominance for the fourth week in a row, with its share price gaining 10 per cent to close the week at Sh31.90.  Eveready and Home Afrika also clung to the top gainers’ list with their share prices gaining 9.46 and 6.15 per cent in that order.

The Treasury bill auction of August 14 received bids totalling Sh23.2 billion against an advertised amount of Sh24 billion, representing a performance of 96.6 per cent. Interest rate on the 91-day, 182-day and 364-day Treasury bills declined. They are expected to drop further on the lowered base lending rate.

During the Treasury bond auction of August 13, the reopened 15-year and 19-year infrastructure bonds received bids totalling Sh323.4 billion against an advertised amount of Sh90 billion, representing a performance of 359.4 per cent, signifying investors’ desire for long-term government securities.

Amount of money sent by Kenyans in diaspora in July dropped by 100 basis points as a five per cent excise duty by the US government took effect.

The provision requires that the remittance transfer providers collect the tax, and the remittance transfer providers are responsible for remitting such tax quarterly to the Secretary of the Treasury.

Remittance inflows to Kenya totalled $410.1 million (Sh53.1 billion) in July 2025 from $414.3 million (Sh53.6 billion) in July 2024.

The 12-month cumulative inflows to July 2025 increased by 11.1 per cent to $5.08 billion (Sh657 billion) compared to $4.57 billion (Sh591 billion) in a similar period in 2024.

Remittance inflows remain a key source of foreign exchange earnings and continue to support the balance of payments.