Central bank’s monetary policy committee met yesterday and resolved to keep the base lending rate unchanged at 9 per cent. The decision was informed by the stable macroeconomic environment, anticipated economic growth, and favorable level of inflation.
The committee noted that inflation was within the target range mainly supported by “stable food prices, lower electricity and fuel prices, and muted demand-driven inflationary pressure.” February’s overall inflation dropped to 4.1 percent from 4.7 percent recorded in January.
The Kenyan shilling has remained strong against major currencies due to higher amounts of exports and a drop in the value of imports. Foreign exchange reserves are at a high level of $8.25 billion equivalent to 5.3 month of imports cover.
Credit to the private sector increased by 3.4 percent in February up from 3 percent recorded in January indicating improved access to credit by private entities.
The MPC private sector survey carried out in March 2019 revealed that people are confident about stronger economic growth in 2019 driven by good weather, government investment projects, and stable economic environment.
In relation to High Court’s ruling on interest rate caps, the monetary committee emphasized that the lending rate cap has “severely constrained the formulation, conduct and effectiveness of monetary policy.” Additionally, the members noted that the law has limited credit access to growth sectors such as small and medium size businesses.
The committee chaired by Central Bank’s governor Dr. Patrick Njoroge said it will monitor any negative effects arising from its policy decision and make the necessary adjustments.
