As petroleum firms slashed pump prices, with the grain millers following suit, Central Bank of Kenya (CBK) was not to be outdone in this new wave of consumer philanthropy (a word Mr. Speaker loves to hate).

The CBK announced a 0.5% rate cut in the Central Bank Rate (CBR) coupled with a stepping down of cash ratio requirements for commercial banks from 6% to 5%. This was meant to boost liquidity (cash in circulation) and avert the prospects of rising interest rates in the wake of high inflationary pressures that previously obtained.

Not so far off the Governor’s parlor, at the Prime Minister’s office, a scheme was afoot to come up with dual maize flour prices – one for the urbanites and one for the rural folk (read: a price for the rich and a price for the poor) – and this was subsequently effected mainly in the rural areas. Perhaps the CBK can take some inspiration from this to craft a dual monetary policy for the poor and for the rich! Ironically, Kenya is a persistently dual economy given the 80/20 rule, whereby 80% of the productive resources are controlled by 20% of the populace; thus two economies operate in one... a rich man’s economy and a poor man’s economy.

In the rich man’s economy, inflation does not quite bite and when it does, he just passes it down to the consumer and if that is not enough he lays off excess workers. Somehow in the passing of time this trail of rising commodity prices and laid-off workers, finds its way into the convenient depository of the poor man’s economy. Further, the banks must compensate for the reduced interest margins in the rich man’s economy and prevailing inflation by charging higher rates in the poor man’s economy and giving him next to nothing on his deposits. Of course, the bankers will be quick to point out that the informal economy is prone to higher risks of default and thus the need to up the interest on loans but at the end of the day business is about margins.