CBK spares borrowers higher interest rates as bad loans soar

The Central Bank of Kenya (CBK) has retained its benchmark signal rate at 10.50 per cent, effectively sparing borrowers higher cost of loans.

In a statement following Tuesday's Monetary Policy Committee (MPC) meeting, the regulator said its current monetary policy stance was still transmitting through the economy, adding that inflation was expected to come down.

The MPC noted that inflation is expected to remain within the target range, supported by "lower food prices with the expected improved supply."

"The MPC observed that NFNF (non-food non-fuel) inflation was expected to decline, indicative of easing underlying inflationary pressures," said CBK Governor and MPC Chairman Kamau Thugge.

"The committee further assessed that the impact of the tightening of monetary policy in June 2023 to anchor inflationary expectations was still transmitting in the economy. In view of these developments, the MPC decided to retain the Central Bank Rate (CBR) at 10.50 per cent." Overall inflation in Kenya increased to 6.8 per cent in September 2023 from 6.7 per cent a month earlier, remaining within the government's target range.

Dr Thugge said bad loans had increased with the ratio of gross non-performing loans (NPLs) to gross loans rising to 15.0 per cent in August 2023 compared to 14.2 per cent in August last year. "Increases in NPLs were noted in the manufacturing, mining and quarrying, real estate, and building and construction sectors," said the CBK boss. "Banks have continued to make adequate provisions for the NPLs."