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This paper discusses Kenya’s Request for Extension of the Stand-by Arrangement (SBA). The extension is needed to provide additional time for the authorities to bring the program back on track and reach new understandings with IMF staff on policies and measures that would enable the completion of the pending reviews under the SBA for Kenya. The authorities have committed to strong corrective actions through adopting policies that will enable them to achieve program objectives and reduce near- and medium-term vulnerabilities. The IMF staff supports the authorities’ request for an extension of the SBA for Kenya.

Money and Monetary Policy --- Public Finance --- Interest Rates: Determination, Term Structure, and Effects --- Taxation, Subsidies, and Revenue: General --- Debt --- Debt Management --- Sovereign Debt --- Monetary economics --- Public finance & taxation --- Interest rate policy --- Revenue administration --- Government debt management --- Monetary policy --- Public financial management (PFM) --- Interest rates --- Revenue --- Debts, Public --- Kenya

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Many surveys of the ECB's monetary framework emphasize the inability of financial markets to correctly predict monetary policy decisions. At the same time, these surveys of financial market participants have given relatively high marks to the United States Federal Reserve and the Bank of England on their ability to be understood by financial markets. Against this background, this paper examines the ability of financial markets to correctly anticipate these three central bank policy decisions over the first 3½ years of the ECB. The paper relies on calculations that market participants employ in anticipating policy changes and on term structure regressions that provide ex post evidence of market surprises. While the results suggest that all three central banks are broadly predictable, markets have had difficulty anticipating large changes and cuts in ECB policy interest rates. These surprises may be tied to the large number of policy meetings, particular characteristics of the EONIA money market, and the unique circumstances of the ECB. An added factor may be the absence of a consistent policy on communicating the current stance-if any-of the ECB's policy bias on the future direction of interest rates.

Banks and Banking --- Investments: Futures --- Money and Monetary Policy --- Monetary Policy --- Central Banks and Their Policies --- Interest Rates: Determination, Term Structure, and Effects --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Banking --- Finance --- Monetary economics --- Central bank policy rate --- Yield curve --- Futures --- Market interest rates --- Financial services --- Financial institutions --- Interest rate policy --- Monetary policy --- Interest rates --- Banks and banking --- Derivative securities --- United States

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What might interest rate liberalization do to intermediation and the cost of capital in China? China's most binding interest rate control is a ceiling on the deposit rate, although lending rates are also regulated. Through case studies and model-based simulations, we find that liberalization will likely result in higher interest rates, discourage marginal investment, improve the effectiveness of intermediation and monetary transmission, and enhance the financial access of underserved sectors. This can occur without any major disruption. International experience suggests, however, that achieving these benefits without unnecessary instability, requires vigilant supervision, governance, and monetary policy, and a flexible policy toolkit.

Finance --- Business & Economics --- Banking --- Interest rates --- Monetary policy --- Government policy --- Money market rates --- Rate of interest --- Rates, Interest --- Interest --- Banks and Banking --- Industries: Financial Services --- Money and Monetary Policy --- Market Structure and Pricing: Oligopoly and Other Forms of Market Imperfection --- Interest Rates: Determination, Term Structure, and Effects --- Central Banks and Their Policies --- Information and Market Efficiency --- Event Studies --- General Financial Markets: Government Policy and Regulation --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Monetary economics --- Deposit rates --- Interbank rates --- Loans --- Commercial banks --- Financial services --- Financial institutions --- Interest rate policy --- Banks and banking --- China, People's Republic of

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This paper reviews the impact of interest rate controls in Kenya, introduced in September 2016. The intent of the controls was to reduce the cost of borrowing, expand access to credit, and increase the return on savings. However, we find that the law on interest rate controls has had the opposite effect of what was intended. Specifically, it has led to a collapse of credit to micro, small, and medium enterprises; shrinking of the loan book of the small banks; and reduced financial intermediation. We also show that interest rate caps reduced the signaling effects of monetary policy. These suggest that (i) the adverse effects could largely be avoided if the ceiling was high enough to facilitate lending to higher risk borrowers; and (ii) alternative policies could be preferable to address concerns about the high cost of credit.

Interest rates --- Monetary policy. --- Monetary management --- Economic policy --- Currency boards --- Money supply --- Money market rates --- Rate of interest --- Rates, Interest --- Interest --- Banks and Banking --- Money and Monetary Policy --- Industries: Financial Services --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Interest Rates: Determination, Term Structure, and Effects --- Monetary Policy --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Monetary economics --- Banking --- Finance --- Interest rate policy --- Bank credit --- Credit --- Central bank policy rate --- Monetary policy --- Money --- Financial services --- Loans --- Financial institutions --- Banks and banking --- Kenya

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This Selected Issues paper on Vietnam analyzes interest rate policy under credit control. There are a number of issues involved in setting interest rates in the presence of bank-by-bank credit ceilings that do not arise in other controls. In Vietnam, as macroeconomic stabilization has taken hold, the inconsistencies of an administratively controlled financial system are becoming more evident. This points to the importance of moving quickly to develop additional policy tools so that interest rate policy can be freed from the tradeoffs being faced, allowing different policy objectives to be pursued independently.

Banks and Banking --- Exports and Imports --- Macroeconomics --- Money and Monetary Policy --- Interest Rates: Determination, Term Structure, and Effects --- International Investment --- Long-term Capital Movements --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Current Account Adjustment --- Short-term Capital Movements --- Macroeconomics: Consumption --- Saving --- Wealth --- Finance --- Monetary economics --- International economics --- Banking --- Foreign direct investment --- Current account deficits --- Deposit rates --- Interest rate policy --- Balance of payments --- Financial services --- Credit ceilings --- Money --- Monetary policy --- Interest rates --- Investments, Foreign --- Credit --- Banks and banking --- Consumption --- Economics --- Vietnam