Central Bank of Kenya cuts CBR to 10%

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The Monetary Policy Committee (MPC) through the Central Bank of Kenya cut down Central Bank Rate (CBR) by 50 basis points to 10% on Tuesday from 10.5%. This automatically brings down lending rates of commercial banks to 14% from 14.5%, in accordance with the Banking (Amendment) Act 2015, which capped rates at 4% above the CBR.

The MPC has cut down the CBR in the last three consecutive meetings, citing the easing of inflation pressures as inflation dropped to 6.3% in August from 6.4% the previous month attributed to a stable non-food non-fuel inflation which remained stable over the last 3 months.

Central Bank Governor, Patrick Njoroge, highlighted that inflation is not anticipated to be a concern “The committee observed that demand pressures on inflation are moderate and inflation is expected to decline in the short term…”

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The CBK highlighted a concern in the growth of the private sector, which has continued to slowdown in 2016 to 7% in July compared to 19% in the beginning of the year, missing expectations set at 15.3% for 2016 but still holds an optimistic view of the sector.

“Nevertheless, the MPC Market Perception Survey conducted in September 2016, shows that the private sector remains optimistic for an improved business environment in 2016, supported by macroeconomic stability, public investment of infrastructure, improved agricultural performance and a further recovery in tourism” said Njoroge.

The Central Bank of Kenya, currently celebrating 50 years: promoting price stability, a sound national payment system and a vibrant financial sector, however, maintained it will keep a close watch on the impact of the new law on monetary policy and on the overall economy and use instruments at its disposal to maintain overall price and financial sector stability.

Kenya Banks Reference Rate (KBRR) remains at 8.9% as set in July 2016.

By: Humphrey Ngugi   H_NGUGI

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