At its 27th March monetary policy meeting, the Central Bank Of Kenya (CBK) decided to keep its benchmark interest rate (CBR) unchanged at 10.0% for the third Meeting in a row, a decision widely expected by the market.
With inflation nearly hitting a five year high of 9% as of last month, the Central Bank noted that the rise was as a result of increase in prices of food items saying this was only temporarily and likely to remain outside the government’s target band of 2.5-7.5 percent in the near term.
In a statement, the Bank acknowledged that it was concerned about the “prevailing uncertainties, including the impact of the interest rate caps on the effectiveness of monetary policy.”
Moreover, the Bank claimed that the pace of credit growth had declined gradually to 4.6 percentage points in February 2017, from 13.6 percentage points in July 2015.
“This was partly due to: a slowdown in exports by the manufacturing sector, delays in registration of land titles and building approvals, and, availability of alternative external financing for key private sector projects.” The Bank noted.
“The average maturity of loans has also shifted to short term lending. The number of loan applications increased between September and December 2016, but has stabilized to February 2017. However, loan approvals declined by 6 percent between December 2016 and February 2017. Lending to Micro, Small, and Medium Enterprises (MSMEs) has declined in value terms, reflected in reduced lending by large and medium banks.” It note.
The decision to keep CBR unchanged means that the benchmark lending rate for millions of consumer and business loans, will remain at 14 percent.