CREDIT

CBK retains lending rate at 9% on reduced inflation

Private sector credit grew by 6.3 per cent in the 12 months to August, compared to 6.1 per cent in July

In Summary
  • The MPC is however expecting the cost of living to rise in coming months due to a surge in international oil prices
  • Kenya’s inflation fell to five per cent in August from 6.3 per cent in July
Central Bank CBK headquarters
Central Bank CBK headquarters
Image: FILE

Central Bank of Kenya on Monday kept the base lending rate unchanged at nine per cent, meaning banks will continue to lend at a high of 13 per cent.

‘’The MPC concluded that the current policy stance remains appropriate, and therefore decided to retain the Central Bank Rate (CBR)at nine per cent,’’ CBK said.

The Monetary Policy Committee’s decision to retain the base lending rate is coming a week after Parliamentary Finance Committee rejected proposal to scrap interest capping law introduced in 2016.

 

The committee cited the drop in inflation last month largely due to stable food prices, lower electricity and fuel prices as major reason to retain the lending rate. Kenya’s inflation fell to five per cent in August from 6.3 per cent in July.

Food inflation declined to 6.7 per cent in August from 7.9 per cent in July following improved weather conditions.

The regulator expects inflation to remain within the target range in the near term mainly due to expectations of lower food prices with the expected favourable weather conditions, and lower electricity prices reflecting the reduced usage of expensive power sources.

The MPC is however expecting the cost of living to rise in coming months due to a surge in international oil prices which it said may exert moderate upward pressure on prices of fuel.

‘’Recent increase in international oil prices following Saudi Attack is expected to exert moderate upward pressure on fuel prices, but with limited pass-through effects on inflation,’’MPC said.

Private sector credit grew by 6.3 per cent in the 12 months to August, compared to 6.1 per cent in July supported by ongoing reforms in the banking sector to strengthen the credit information sharing mechanism and promote transparency in pricing.

Average commercial banks’ liquidity and capital adequacy ratios stood at 50.8 per cent and 18.3 percent, respectively, in August.

 

The ratio of gross non-performing loans (NPLs) to gross loans dropped marginally to 12.6 per cent in August compared to 12.7 per cent in June on strong mitigation measures taken by lenders including enhanced recovery efforts.