The Central Bank of Kenya’s Monetary Policy Committee (MPC) meets today Monday 25 November.
Interestingly, this will be the first meeting since repealing the law capping interest rate in a move geared towards increasing credit access in the private sector.
In the last meeting held on September 23 2019, the MPC retained the CBR at 9 per cent. In this case, the MPC opined that the economy was operating at close to its potential with inflation remaining within the target range.
The Monetary Policy Committee (MPC) reviews and announces the Central Bank Rate (CBR) every two months.
According to the CBK’s website, “Movements in the CBR, both in direction and magnitude, signal the monetary policy stance”.
Moreover, CBR is the basis for all monetary policy operations as it enhances clarity and certainty in monetary policy implementation.
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Several analysts expect the MPC to cut the CBR due to several factors.
First, inflation in October rose to 5 per cent from 3.8 per cent recorded in September. This is within the desirable range of 2.5%-7.5%. Lowering the central bank rate would provide a moderate stimulus to the economy.
In addition, lowering the rate will provide a boost considering the moderate growth in GDP witnessed in the first half of 2019. In this case, a lower Central Bank Rate will encourage banks to lend to the private sector thereby increasing credit access to the SMEs.
Furthermore, with the ongoing government fiscal consolidation plans, a lower CBR is likely to provide incentives for economic growth.
