Effects of Monetary Policy Tools

Monetary policy is the economic tool given by the Central Bank to manage the supply of money and interest rates in a country. These monetary policies include Cash reserves maintained by commercial banks, Repos and banks interest rates which are used to achieve microeconomic objectives like inflation, growth and liquidity, eliminating financial crisis and achieving full employment. Various studies have been done in relation to effects of monetary policy tools on commercial banks financial performance but they did not factor in the effects of Central bank rate on performance of commercial banks in Kenya. The main objective of this study is to establish the effect of monetary policy tools on the performance of commercial banks in Kenya.The specific objectives of the study were; to establish the effect of Central Bank Rate (CBR) on the financial performance of Commercial Banks, to determine the effect of Reserve Ratio Requirement on the financial performance of Commercial banks and to determine the effects of Repos on the financial performance of Commercial Banks in Kenya. This study focused on the Kenya Commercial Bank (KCB).