Kenya: Rising Treasury Bill Yields Won't Derail Rate Cuts, CBK Governor Thugge Says

What the report says

Central Bank of Kenya Governor Kamau Thugge said in Nairobi that higher Treasury bill yields are not expected to weaken the pass-through from monetary policy to commercial bank lending rates. His remarks followed a post-Monetary Policy Committee briefing and came as the 91-day Treasury bill yield and the policy rate were both close to 8.8 percent.

Thugge said the recent alignment between the Kenya Shilling Overnight Interbank Average Rate, or KESONIA, and the Central Bank Rate has improved how changes in the policy rate affect bank pricing. He argued that when the CBK adjusts the CBR, KESONIA should move in step and then feed through to lending and deposit rates.

The report said the central bank has been easing policy to support lower borrowing costs and stronger private-sector credit. It also noted that average lending rates in Kenya have fallen while deposit rates have edged up, squeezing bank margins but leaving a spread still above historical norms. The CBK also reduced its interest-rate corridor earlier this year to tighten the connection between the policy rate and market rates.

The article adds that Treasury securities remain attractive to banks because they offer relatively low-risk returns, which can influence how lenders balance government paper against lending to households and businesses. That dynamic matters because it can affect credit growth even when the central bank is trying to push borrowing costs lower.