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The poor logic behind interest rate rise..
jimmy1
#51 Posted : Saturday, November 19, 2011 3:18:29 AM
Rank: Member

Joined: 2/11/2011
Posts: 240
Location: jamuhuri ya kenya
guru267 wrote:
I simply advise that these policies continue despite their weakening effect in the shilling since its only fairly short term.

In one thread you wrote "the shilling must continue to fall whether the CBK likes it or not....whether they raise rates or not".

You also wrote
"i'm not blaming anyone for causing this but i'm pretty sure my dog would do a better job than the 'doctor' is currently doing at trying to solve this mess.."

This are very strong opinions which you are entitled to. This leads me to believe that you have a personal interest in a weaker ksh just like many other people (mainly importers) have an interest in a strong ksh. Could your personal interest be related to currency speculation?
pops
#52 Posted : Saturday, November 19, 2011 10:53:24 AM
Rank: Member

Joined: 9/13/2006
Posts: 123
@jimmy1: you are an importer and probably feel that you will benefit from the 92 rate to the USD, but do the maths taking into account the current interest rate on borrowing, or the amount you will pay in the period your goods are shipped and your LC has to be paid, and you will see you are better off with the USD at 100 but interest rates at 16%. Especially if you are an importer who is rolling over containers every week.
the deal
#53 Posted : Saturday, November 19, 2011 3:10:06 PM
Rank: Elder

Joined: 9/25/2009
Posts: 4,534
Location: Windhoek/Nairobbery
If the IMF loan comes in by Dec i see interest rates being cut by Q1 2012, inflation might be on its way down by then...yields on T-Bills will be tumbling and then stocks.....one can't tell considering Kenyans love destructive politics.
guru267
#54 Posted : Saturday, November 19, 2011 3:18:57 PM
Rank: Elder

Joined: 1/21/2010
Posts: 6,675
Location: Nairobi
jimmy1 wrote:
guru267 wrote:
I simply advise that these policies continue despite their weakening effect in the shilling since its only fairly short term.

In one thread you wrote "the shilling must continue to fall whether the CBK likes it or not....whether they raise rates or not".

You also wrote
"i'm not blaming anyone for causing this but i'm pretty sure my dog would do a better job than the 'doctor' is currently doing at trying to solve this mess.."

This are very strong opinions which you are entitled to. This leads me to believe that you have a personal interest in a weaker ksh just like many other people (mainly importers) have an interest in a strong ksh. Could your personal interest be related to currency speculation?


@jimmy1 lol...
This was a very heated moment for me..

Though I have interest in the kshs falling because literally all my income comes from outside kenya this was not the reason..

The policies being implemented to stop the shilling decline will destroy economic growth in the country, thats what I have a problem with...
Mark 12:29
Deuteronomy 4:16
Scubidu
#55 Posted : Saturday, November 19, 2011 6:00:17 PM
Rank: Veteran

Joined: 9/4/2009
Posts: 700
Location: Nairobi
pops wrote:
its all well and good saying that we should be patriotic and buy kenyan products to shore up the shilling but the reallity is that kenyan industries are struggling and can not produce high quality products due to the high cost of power, labour, fuel, finance costs (thanks to the interest rate rise!) in this country. that is why goods produced in india and china can be shipped all this way, paid full duty on and still be sold cheaper than kenyan products! second thing is quality - compare local biscuits with imported ones from mauritius or south africa, simillar prices but big difference in quality. if i have choice in nakumatt i am definitely going to but the imported one, why should i pay for an inferior product at the same price? i think all businesses in this country are going to have rough run for the next few months and only the strongest will survive. its admirable the resillience businesses have in this country - they pay among the highest tax rates in the world and get zero support from their government apart from corruption and great infrastructure!


sad reality it is if most of what we produce are of inferior quality. but if all we do is import all these high quality goods from abroad, how do we pay for it. are kenyan workers of high quality? smile
“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
the deal
#56 Posted : Tuesday, November 22, 2011 5:00:07 PM
Rank: Elder

Joined: 9/25/2009
Posts: 4,534
Location: Windhoek/Nairobbery
What you don't realize is that even if CBR is cut today to 5%, banks will not lower their lending rates why? cos big/bulky/corporate depositors/investors will demand inflation beating returns, which even the current 3 month T-Bill at 16% is not offering!
GGK
#57 Posted : Tuesday, November 22, 2011 5:59:51 PM
Rank: Member

Joined: 11/21/2006
Posts: 608
Location: Ruiru
the deal wrote:
What you don't realize is that even if CBR is cut today to 5%, banks will not lower their lending rates why? cos big/bulky/corporate depositors/investors will demand inflation beating returns, which even the current 3 month T-Bill at 16% is not offering!


A very fair observation

May be there should be differentiated interest rates depending on the intended use of the cash. Production oriented credit should be availed at concessionary rates. Like we had KTDC for tourism. But if a fella wants cash to import furniture and clothes, the bank should charge him 100% interest rate.
"..I am because we are. "― Ubuntu, Umtu,
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