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MPC expected to keep lending rate at 9pc

By Otiato Guguyu | September 20th 2018

Central Bank of Kenya’s Monetary Policy Committee (MPC) is likely to retain the benchmark lending rate at nine per cent next week, an emerging markets investment bank has said.

Renaissance Capital’s Sub-Saharan Africa Economist Yvonne Mhango said tax-induced inflation on petroleum products and emerging market volatility were likely to hold back the MPC’s hand.

She said they expected energy inflation to pick up by nearly one or two percentage points, bringing consumer prices towards 7.5 per cent, the upper limit set by Government on inflation targets.

“We do not see them cutting the rates now, we expect them to hold,” Ms Mhango said.

CBK will be meeting on Tuesday, almost five days before the new inflation numbers are released by the Kenya National Bureau of Statistics.

The present macroeconomic environment where credit is low and inflation is tamed calls for further cuts, even as CBK meets under the ongoing resistance by Government to amendments in the Finance Bill.

Mhango said analysts were surprised that CBK cut rates twice under the rate cap regime, knowing it would work against lending to private sector.

The Central Bank Rate was lowered to 9.5 per cent in May then nine per cent in July, cutting the maximum lending rate for commercial banks to 13 per cent from 14 per cent at the beginning of the year.


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