Inflation
    Boom
    Recession            
    Depreciation

The interest rates also depends on business cycles (as above).  As the economy moves in the four (4) business cycles, interest rates will shift as well e.g during economic recessions, short-term interest rates experience sharp decline than L.T interest rates.  This is because of the following reasons:

i)    The CBK operates mainly in the S.T Sector (market) and its intervention has a major effect on S.T interest rates.

ii)    L.T interest rates generally reflect the average expected inflation rate over the next 10 – 20 years.

These expectations do not change generally because L.T interest rates are fixed due to debt covenants entered into during borrowing time.