Monetary Policy Implementation
Open Market Operations
The principal objective of Open Market Operations (OMO) is to maintain optimal liquidity in the domestic market guided by the prescribed monetary policy stance. The Central Bank of Kenya implements OMO through two main instruments, namely Repurchase Agreements (Repo and Reverse Repo) and Term Auction Deposit (TAD).
Repo and TAD are for liquidity absorption while Reverse Repo is for liquidity injection. These instruments are open to commercial banks only.
REPO (Sale of Securities)
Repurchase Agreements (Repo) are conducted whenever the CBK is mopping up liquidity from the domestic market to achieve the desired level of liquidity. The Repo transactions will involve sale of Government securities to the counterparty lending funds to the Central Bank.
OMO unit may conduct two Repo Sessions as and when necessary.
Term Auction Deposit (TAD)
TAD is an additional instrument to mop up liquidity from the Banking system. The facility is for tenors of 14, 21 and 28 days.
Reverse Repo (Purchase of securities)
Reverse Repo is for injecting liquidity into the Banking system in line with the deviations or shortfall of set monetary targets or as approved by the Monetary Policy Management Committee. Reverse Repo transactions involve purchase of Government securities by the Central Bank from commercial banks. Haircuts are however applied on securities to guard against any risks arising out of market and price movements.