It all started with the depreciating shilling and Kenyans watched as the shilling continued to weaken against the dollar. This was later to be followed by rising inflation and nobody would exactly tell what was wrong. Some blamed it on the fuel (high cost of imported oil) while others blamed the Central bank accusing the Governor of incompetence and inability to control the shilling (tame the weakening shilling). Then it was time to act, serious drastic measures were adopted:

(i) The Central Bank suspended the dollar transactions by the commercial banks whom it accused of hoarding the dollar for speculative purpose and instead decided to carry out the transactions.

(ii) The Central Bank increased the base lending rates.

Required:

(a) Discuss the implications of the above measures and how they have succeeded to taming the shilling as well as reducing inflation.