CBK retains benchmark lending rate at 10pc

Central Bank of Kenya (CBK) has retained the benchmark lending rate at 10 per cent, making it 14 straight months that the rate has remained unchanged.

The Monetary Policy Committee (MPC) yesterday said the decision was taken to reflect, among other factors, a drop in inflation, stable foreign exchange market and comfortable import cover.

“The committee concluded that inflationary pressures in the economy were muted and inflation was expected to continue to decline in the short term,” said CBK Governor Patrick Njoroge, who chairs the committee.

The Central Bank Rate was last changed in September 2016 when the committee cut it from 10.5 per cent to 10 per cent in the same month that a cap on bank loan interest rates took effect.

Leaving it unchanged means borrowers will still not be charged interest above 14 per cent on loans.

Yesterday’s meeting was held against the backdrop of what CBK described as favourable weather conditions, sustained macro-economic stability, conclusion of prolonged election period and improved outlook for the global economy.

MPC believes the economy may be out of the woods after receiving a battering from drought in the first half of the year followed by prolonged elections in the second half. It projects the economy to grow by 5.1 per cent this year.

“Growth has principally been supported by the services sector particularly the micro, small and medium enterprises,” said Dr Njoroge.

The MPC further noted its Private Sector Market Perception Survey conducted this month showed optimism anchored on the conclusion of the elections, improved weather conditions and continued public investment in infrastructure.

Month-on-month overall inflation fell to 5.7 per cent in October from 7.1 per cent recorded in September, being the first time in 17 months that food inflation has hit a single digit.