DFI 301 : MONETARY THEORY AND PRACTICE ASSIGNMENT

D33/138626/2019
SUMEIYA FARJALLAH

Year Inflation Rate (%) Interest rates (%)

2021 5.73?% 7%
2020 5.40% 7%
2019 5.24% 8.50%
2018 4.69% 9%
2017 8.01% 9.50%
2016 6.30% 10.50%
2015 6.58% 11.50%
2014 6.88% 8.50%
2013 5.72% 8.50%
2012 9.38% 18.00%
2011 14.02% 7.00%
2010 3.96% 6.00% Inflatio
2009 9.23% 8.00%
2008 26.24% 9.00%
2007 9.76% 10.00%
2006 14.45% 6.00% 90%
2005 10.31% 2.00%
2004 11.62% 2.00% 80%

70%
 90%

80%
2003 9.82% 8.00%
2002 1.96% 10.00% 70%
2001 5.74% 16.00%
2000 9.98% 20.00%
60%
1999 5.74% 32.00%
1998 6.72% 30.00%
50%

iNTEREST RATES
1997 11.36% 28.00%
1996 8.86% 24.00%
40%
1995 1.55% 17.00%
1994 28.81% 36.00%
30%
1993 45.98% 85.00%
1992 27.33% 19.00%
20%
1991 20.08% 18.00%
1990 17.78% 15.00%
1989 13.79% 12.00% 10%

1988 12.27% 10.00%

1987 8.64% 8.50% 0%

1986 2.53% 21 19 17 1
9.50% 20 20 20 20
1985 13.01% 8.00%
1984 10.28% 5.50%
1983 11.40% 4.00%
1982 20.67% 7.50%
1981 11.60% 4.00%
1980 13.86% 3.00%

Years Money Supply M1 (KES Billions) Money Supply M2 (KES Billions)

2022 1848.09 3431.56 Mon
2021 1820 3435.3
6000
2020 1500 2850
2018 1350 2500
oney Supply M1 & M2 (KES Billions)

5000
2016 1050 2200
2014 900 1700
4000
2012 750 2000
2010 450 900
3000
2008 400 400

2000

1000
 Money Supply M1 & M2 (KES
4000

3000

2006 350 300

2000
2004 200 280
2002 150 250
1000
2000 120 150
1995 100 120
0
2022 2021

M1 represents money that people can gain access to easily and immediately to pay for goods and services (such as c
M1 describes the most liquid and widely accepted assets used to easily settle transactions: currency, demand deposits,
M2 is larger in Kenya than M1
There is a rapid growth in both cases of money supply as years go by i.e from 1995 to date.
 Inflation Rates and Interest Rates ( Central Bank Of
Kenya from 1980 to 2021)
Interest rates (%) Inflation Rate (%)

90% 0.5

80% 0.45

0.4
ation rates

70%
 90% 0.5

80% 0.45

0.4

Inflation rates
70%

0.35
60%

0.3
50%
iNTEREST RATES

0.25

40%
0.2

30%
0.15

20%
0.1

10% 0.05

0% 0
21 19 17 15 13 11 09 07 05 03 01 99 97 95 93 91 89 87 85 83 81
20 20 20 20 20 20 20 20 20 20 20 19 19 19 19 19 19 19 19 19 19

YEARS

Money Supply M1& M2 in Kenya from 1995-2022

6000
oney Supply M1 & M2 (KES Billions)

5000

4000

3000

2000

1000
 Money Supply M1 & M2 (KES 4000

3000

2000

1000

0
2022 2021 2020 2018 2016 2014 2012 2010 2008 2006 2004 2002 2000 1995

YEARS

Money Supply M1 Money Supply M2

s and services (such as cash-on-hand). M2 consists of all the assets in M1 plus several additional assets (such as savings deposits
rency, demand deposits, and highly liquid accounts.
Of

0.5

0.45

0.4
ation rates
 0.5

0.45

0.4
Inflation rates

0.35

0.3

0.25

0.2

0.15

0.1

0.05

0
81
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ets (such as savings deposits in banks).