The Central Bank of Kenya(CBK) has lowered the Central Bank Rate (CBR) to 8.50 percent from 9 percent for the first time in 17 months.
The MPC on 25 November held its bi-monthly meeting against a backdrop of domestic macroeconomic stability and the repeal of the interest rate cap.
MPC reports that month-on-month inflation remained within the target in September and October 2019 at 3.8 percent and 4.95 percent respectively.
Furthermore, food prices are expected to remain low in the near term due to improvements in weather conditions and lower electricity costs.
The foreign exchange market remained stable supported by the narrowing current account deficit which narrowed to 4.1 percent of GDP in the 12 months to September 2019.
Moreover, the MPC reported 6.6 percent growth in private sector credit in the 12 months to October. For instance, credit to consumer durables sector grew 28.6 percent with finance and insurance growing by 15.1 percent.
In addition, the average commercial banks’ liquidity and capital adequacy ratios stood at 51.2 percent and 18.3 percent respectively in October. Further, the ratio of non-performing loans (NPLs) to gross loans declined to 12.3 per cent in October from 12.6 per cent in August.
On the repeal of the rate cap, MPC welcomed the move saying that the reform will restore the clarity of monetary policy decisions and strengthen the transmission of monetary policy.