An accommodative policy stance and stable inflation saw the Central Bank Of Kenya’s Monetary Policy Committee retain the base lending rate at seven per cent during Tuesday's sitting.
Economic experts had said they expected inflation to remain stable despite supply-side disruption due to COVID-19, mainly supported by stable food prices due to favourable weather conditions.
According to Cytonn Investment’s pre-MPC note, the recent re-opening of the majority of the global markets will also address supply chain issues causing import prices to stabilise.
''Given that one of the main goals of monetary policy is to ensure price stability, we believe that the stable inflation rate will not exert pressure on the MPC to implement inflationary control,’’ it says.
It adds that despite the high liquidity in the money market, which came about as a result of the previous reduction in Cash Reserve Ratio, additional rate cuts would not lead to a rise in private sector growth.
This is due to reduced economic activities in the country’s key sectors that have led to elevated credit risk, which had resulted in reduced lending by banks.
''The shilling has been depreciating against the dollar. As such, a further rate cut would put it under pressure thus making Kenya a less attractive investment destination,’’ Cytonn reports.
