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Government plans interest corridor to lower costs of credit: IMF

The East African nation suffers from high commercial rates, with most banks lending at above 20 percent, frustrating businesses, and policymakers who would want credit to be more affordable to spur economic growth.

The International Monetary Fund (IMF) logo is seen at the IMF headquarters building during the 2013 Spring Meeting of the International Monetary Fund and World Bank in Washington, April 18, 2013

Kenya's central bank will align the interbank lending rates with its benchmark lending rate through a new interest rate corridor to lower the cost of credit in the real economy, the International Monetary Fund said.

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"The authorities will align the interbank rates with the policy rate and formally announce and implement an interest corridor," the IMF said in a press statement on Monday.

It said the move would strengthen "the monetary policy transmission mechanisms in the context of a floating exchange rate regime."

Closer alignment of the interbank and policy rates will also help the central bank keep inflation within the medium term target of 2.5-7.5 percent, the IMF said.

The central bank was not immediately available for a comment.

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