selah wrote:Now lets say CBK increases its CBR so it tightens liquidity i.e the supply of KSh in the market but thats not the only reason the shilling is loosing its value is it? the $ is in high demand just as @the deal said due to us being net importers so even if the rate is increased the $ demand will continue rising.
Problem is CBK would have to raise CBR by such a huge margin it would be impractical. For sure, no one, including CBK, can tell you the actual fundamentals behind the massacre of the KShs - hizo stori za euro zone debts, oil prices,etc are mere excuses, not reasons. So CBK is really being outmanoueuvred by speculators & USD panic buyers. I thought it was currency printing for 2012 but realised this problem of nights of long knives extends to Tz & Ug:
1)In Kenya, KShs value had depreciated by 25% from 1/12/10
2)In Tz, TShs value had haemorrhaged about 11.65%
3)In Ug, UGX value took a 26.41% banging.
And all the gilts, inflation rates and commercial lending rates are heading for the stratosphere. The TZS is buoyed somewhat by the gold reserves the country has, plus adequate food reserves it has compared to Kenya and Ug. CBK and Bank of Tz are in lala land, but Bank of Uganda is contemplating unusually harsh measures to rein in the UGX slide. Are the 3 regulators speaking among themselves coz they face very similar problems?
Already, analysts are speaking of the KShs trading at the 110-120/= range. I hope we don't go the Tz route where a lot of services (rents, hotel bookings,etc)are quoted in USD.