Nairobi, Feb. 22 -- The Monetary Policy Committee (MPC) of the Central Bank of Kenya (CBK) met on January 30, 2023 to, inter alia, review the outcomes of its previous rate decisions. The team then decided to retain the policy rate, the central bank rate at 8.75 percent.

Despite the neutral stance, the committee is way behind the curve, given developments in the global economy.

Broadly, monetary policy transmission mechanisms describe how policy-induced changes in short-term interest rates or the nominal money stock impacts variables such as output, prices, lending rates, the exchange rate and stock market prices.

In Kenya, the previous empirical literature has identified four money policy transmission channels, namely interest rate, cr...