A benchmark rate, also known as an interest rate benchmark or reference rate, reflects the cost of borrowing money in various markets and is regularly reviewed. It indicates the expense a bank incurs when sourcing funds from other banks, pension funds, money market funds, insurance companies, or similar sources. This benchmark rate plays a crucial role in the banking system, financial contracts, and the overall economy. It serves as the basis for complex financial transactions and various agreements such as bank overdrafts and mortgages. Therefore, understanding why it is important and why the Central Bank of Kenya is increasing its benchmark rate is essential. According to the Central Bank of Kenya (CBK) Act's section 36(4), the CBK has the responsibility of publishing the floor rate at which it charges banks on the money it lends them. This rate, known as the Central Bank Rate (CBR), is reviewed at least every two months by the Monetary Policy Committee (MPC) of the CBK. The magn...