Central Banks Monetary Policy Committee has hold the lending rates by commercial banks at 13 percent.This comes as an out-turn of strong economic expansion and solidity in the macro-economic throughout the year.
CBK Governor Patrick Njoroge declared yesterday, "The Committee noted that inflation expectations continued well affixed within the marked range, but concluded that there was need to monitor the second-round inflationary effects arising from the VAT on petroleum products, and any perverse response to its previous decisions." He added that inflation was expected to increase due to the recent eight percent value added tax on petroleum products suggesting that food prices are expected to be low as a result of good weather.
In May, Central Bank rate was lowered to 9.5 percent then nine percent in July making commercial banks’ lending rates drop from 14 percent to 13 percent at the commencement of the year.
The committee forecasts that lending to the private sector is expected to hit a high. Private sector credit rose to 4.3 percent in the last 12 months due to highest borrowing rates by the manufacturing, building and construction, trade areas and manufactured items.
The assessment showed that the banking sector had employed numerous efforts in transferring of assets and liabilities from Chase Bank which went in receivership to SBM bank Kenya in August.
Treasury Cabinet secretary Henry Rotich alleged interest rate capping had a negative impact on the economy when reading the budget in June.
The first quarter of 2018 data showed a spontaneous increase in the economy with 5.7 percent GDP growth as compared to 2017’s first quarter which had 4.8 percent growth.