| dc.description.abstract | The ever-changing interest rates slapped on credit by banks due to changes in the central bank reference rate set by the Monetary Policy Committee (MPC), continue to worry many Kenyans.
The committee reviews the Central Bank Rate (CBR), which informs how banks price their loans or mortgages from time to time.
Interest rates change over time primarily due to adjustments made by the CBK to CBR also known as the discount, benchmark, or key interest rate.
This is the interest at, which local commercial banks can borrow from the CBK, which impacts what they charge their customers. In addition, the regulator can adjust the base rate to manage economic growth and inflation.
When an economy is overheating, with rising inflation, the CBK might increase the base rate to cool down spending and borrowing leading to higher interest rates for loans and mortgages.
Conversely, in periods of economic downturn or recession, it may lower the base rate to stimulate economic activity by making borrowing cheaper, which translates into lower interest rates. | en_US |
