The Central Bank of Kenya (CBK) has spared Kenyans from expensive loans following retention of its benchmark lending at 13 per cent, citing positive progress in cost of living and exchange rate in the Kenyan market.
- The MPC noted that its previous measures have lowered inflation, addressed the exchange rate pressures, and anchored inflationary expectations.
- The Committee further noted that overall inflation is expected to continue declining in the near term, supported by lower food and fuel prices, and pass-through effects of the recent exchange rate appreciation.
- Therefore, the MPC concluded that the current monetary policy stance will ensure that overall inflation continues to decline towards the 5.0 percent mid-point of the target range, and thus decided to retain the Central Bank Rate (CBR) at 13.00 percent.
“The MPC will closely monitor the impact of the policy measures as well as developments in the global and domestic economy and stands ready to take further action as necessary in line with its mandate. The Committee will meet again in June 2024,”
Inflation
Kenya’s overall inflation declined further to 5.7 percent in March 2024 from 6.3 percent in February, driven by lower food and fuel inflation.
Food inflation declined to 5.8 percent in March from 6.9 percent in February, reflecting lower prices of some food items particularly maize and wheat products, carrots, kales/sukuma wiki, spinach, and cabbages, following improved supply attributed to ongoing harvests and favourable weather conditions.
Fuel inflation declined to 12.3 percent in March from 13.4 percent in February, largely reflecting the impact of the shilling’s appreciation which resulted in a decrease in electricity prices and a downward adjustment in pump prices. Non-food non-fuel (NFNF) inflation remained stable at 3.6 percent in February and March.
CBK says the overall inflation is expected to moderate further in the near term, supported by easing food and energy prices, pass-through effects of the recent exchange rate appreciation, and the impact of monetary policy actions which continue to filter through the economy.
“The CBK foreign exchange reserves, which currently stand at USD 7,136 million (3.77 months of import cover), continue to provide adequate cover and a buffer against any short-term shocks in the foreign exchange market.”
CBK records indicate that growth in commercial bank lending to the private sector stood at 10.3 percent in February 2024 compared to 13.8 percent in January 2024. Credit growth to selected key sectors was manufacturing (13.6 percent), transport and communication (7.5 percent), trade (10.7 percent), and consumer durables (7.4 percent). The number of loan applications and approvals remained resilient, reflecting sustained demand particularly for working capital requirements.
The ratio of gross non-performing loans (NPLs) to gross loans stood at 15.5 percent in February 2024 compared to 14.8 percent in December 2023. Increases in NPLs were noted in the real estate, trade, personal and household, energy and water and building and construction sectors.
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