Interbank lending rate down

The interbank cash market yesterday recorded a downward trend on overnight borrowing rates after dropping to 28 per cent, thanks to liquidity stance easing in the market.

The rate hit the ceiling in the previous week after reaching 38 per cent following the Central Bank tough money measures to curb the Tanzania shilling free fall and high inflation rate that dried up liquidity in circulation.

The National Microfinance Bank (NMB) noted the money situation started to change following moderate demand for the shilling amid signs of overnight rate declining.

"Liquidity stance continued to ease as moderate demand for the local currency was experienced with overnight rates showing a decreasing trend," NMB said in its e-market report.

Standard Chartered Bank also noted that in its daily market report that the interbank cash market registered a down trend on the overnight rates.

Standard Chartered further said the Bank of Tanzania (BoT) managed to mop 10bn/- using Repurchase Agreement (Repo) for one and two weeks at 15 and 16 per cent, respectively.

In another development, the Shilling gained some ground mid last week against the US Dollar in a very quiet market.

"Sentiment is that trading volumes will pick up as more players start coming back to the market,” Standard Chartered has projected. The bank, however, warned that low to moderate level of volatility should be expected in foreign exchange market.

The interbank borrowing rate is a significant rate on pricing the loans' interest rates as it increases the cost of lending.

This is a window which banks extended loans to each other to bridge money shortage among them.

In Uganda traders last week staged a three-day strike protesting increase on interest charged on old loans.

The traders argued that the increment should be charged on new loans rather than on old loans. negotiations were going on.
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