CBK retains base lending rate at 7pc,11th time in a row

NAIROBI, Kenya, Nov 30 – The Central Bank of Kenya has retained the benchmark lending rate at 7 percent for the eleventh time in a row having it from 7.25 percent in March 2020.

CBK Governor Patrick Njoroge, who issued a statement after holding the Monetary Policy Committee (MPC) meeting,  said that the decision to retain the base lending rate was informed by the existing accommodative monetary policy stance.

Additionally, CBK said the inflation rate will remain within the targeted range of (2.5-7.5 percent) after declining to 6.5 percent in October from 6.9 percent in September reducing the pressures for the MPC to maintain price stability.

The regulator said that the leading indicators for the Kenyan economy point to a continuing recovery in the second half of 2021  which according to the Kenya National Bureau of Statistics (KNBS) grew 10.1 percent compared to a contraction of 4.7 percent in the same quarter of 2020 aided by high growth in education, transportation, and ICT sector.

“The MPC will closely monitor the impact of the policy measures, as well as developments in the global and domestic economy, and stands ready to take additional measures as necessary,” Njoroge said in a statement.

The drop in inflation rates was attributed to a drop in fuel prices whose inflation in October dropped to 9.6 percent from 11.1 percent in September while food inflation remained elevated at 10.6 percent in October.

MPC highlighted a positive economic outlook aided by a stable and resilient banking sector, growth in the private sector, and strong growth of exports which grew by 10.8 percent from January to October 2021.

“The CBK foreign exchange reserves, which currently stand at USD8,768 million (5.36 months of import cover), continue to provide adequate cover and a buffer against short-term shocks in the foreign exchange market,” the bank noted.

The recovery in the country’s economic activity was mainly attributed to the lifting of the curfew, reduced COVID-19 infection, and increased vaccinations.

In addition, the regulator attributed the rollout of the economic stimulus program and economic recovery strategy announced by the government as a key driver for the rebound in revenue performance and business environment.

“Leading economic indicators point to a continuing recovery in the second half of 2021 also boosted by the full reopening of the economy. Economic growth is expected to remain strong in 2022, with the normalization of domestic economic activities, as well as the easing of global supply chain constraints, and stronger global demand,” the statement read in part.